Diferencias contables entre criterios de la CNBV e IFRS (Emisora – Garante) Volkswagen Financial Servicios AG (Garante) reporta sus resultados bajo las Normas Internacionales de Información Financiera (IFRS por sus siglas en inglés-International Financial Reporting Standards) y Volkswagen Bank S. A. Institución de Banca Múltiple. (Emisora) bajo los Criterios de Contabilidad para Sociedades Controladoras de Grupos Financieros (CCSCGF), emitidos por la Comisión Nacional Bancaria y de Valores (CNBV) en México, por lo que, a continuación se muestran de forma enunciativa las principales diferencias. Este resumen no se debe tomar como exhaustivo de todas las diferencias entre los CCSCGF e IFRS. No se ha hecho ninguna tentativa de identificar todas las diferencias del registro, de la presentación o de la clasificación que afectarían las transacciones o los acontecimientos que se presentan en estados financieros, incluyendo las notas a los estados financieros. Se describe a continuación una descripción de las diferencias significativas entre los CCSCGF e IFRS. Conceptos relevantes del resumen de diferencias entre CCSCGF e IFRS De conformidad con los Criterios contables, a falta de un criterio contable específico de la CNBV, deberán aplicarse las bases de supletoriedad, conforme a lo establecido en la NIF A-8 “Supletoriedad”, en el siguiente orden, las IFRS aprobadas y emitidas por el Comité de Normas Internacionales de Contabilidad (International Accounting Standards Board, IASB), así como los Principios de Contabilidad Generalmente Aceptados aplicables en los Estados Unidos tanto las fuentes oficiales como no oficiales conforme a lo establecido en el Tópico 105 de la Codificación del Consejo de Normas de Contabilidad Financiera (Financial Accounting Standards Board, FASB), emitidos por el Financial Accounting Standards Board o, en su caso, cualquier norma de contabilidad que forme parte de un conjunto de normas formal y reconocido.

Pensiones (Beneficios a los empleados)

CCSCGF – NIF D 3 “Beneficios a los empleados”

Las obligaciones se reconocen en los resultados de cada ejercicio, con base en cálculos actuariales del valor presente de estas obligaciones basadas en el método de crédito unitario proyectado, utilizando tasas de interés reales. Bajo las NIF mexicanas todos los beneficios por terminación, incluyendo aquellos que se pagan en caso de terminación involuntaria, son considerados dentro del cálculo actuarial para estimar el pasivo correspondiente por obligaciones laborales. Al igual que la norma internacional, las NIF mexicanas miden los activos de los planes de pensiones a valor razonable; sin embargo, no especifican la utilización de un precio de oferta como referencia. Bajo las NIF mexicanas no hay límite en el valor de los activos del plan que se puede reconocer.

Las NIF mexicanas utilizan como fecha de medición de los planes de beneficios definidos, la misma fecha que el balance general o un máximo de 3 meses antes del balance general. Participación de los Trabajadores en las Utilidades (PTU) Diferida

Bajo las NIF mexicanas la PTU diferida se reconoce con base en el método de activos y pasivos.

IFRS – IAS 19 “Employee Benefits” El cargo al estado de resultados se determina usando el método de Unidad de Crédito Proyectado con base en cálculos actuariales para cada esquema. Las diferencias actuariales se reconocen en el capital en el momento que suceden. Los costos de servicios tanto actuales como anteriores, junto con el desglose de descuentos menos el retorno esperado de activos planeados, se reconocen en gastos de operación.

Bajo las IFRS, una entidad reconoce los beneficios por terminación como pasivo siempre y cuando la entidad esté obligada a:

(a) terminar el contrato de empleo de un empleado antes de la fecha de retiro; o (b) establecer beneficios por terminación como resultado de ofertas hechas para

incentivar renuncias voluntarias. Sin embargo, la misma norma internacional señala que algunos beneficios a empleados se pagan independientemente de la razón por la cual el empleado salga de la compañía. Sin embargo, los pagos por dichos beneficios se describen como indemnizaciones por terminación y son considerados más bien como beneficios posteriores en vez de beneficios por terminación.

Bajo las IFRS los activos de los planes de pensiones deben medirse a su valor razonable. En el caso de inversiones cotizadas en un mercado activo, el precio de oferta debe ser utilizado como referencia para dicha valuación.

Las IFRS establecen una prueba de “techo” sobre los activos del plan, bajo la cual se tiene que analizar la recuperación de dichos activos y se establece un límite para su reconocimiento.

Bajo las IFRS la fecha de medición de los planes de beneficios definidos (fecha en la cual se valúan los activos y pasivos del plan) es la misma fecha que el balance general. Participación de los Trabajadores en las Utilidades (PTU) Diferida Bajo las IFRS la PTU se considera como un beneficio a los empleados dado que se paga basándose en el servicio prestado por el empleado. Se trata como beneficio a corto o largo plazo. No se reconoce el diferido con base en el método de activos y pasivos dado a que ese método sólo se aplica a impuestos a las utilidades.

Costos de generación de contratos de crédito CCSCGF - Anexo 33 (Circular Única de Bancos) B-6 “Cartera de crédito”

Los costos y gastos asociados con el otorgamiento del crédito, se reconocerán como un cargo diferido, el cual se amortizará contra los resultados del ejercicio como un gasto por intereses, durante el mismo periodo contable en el que se reconozcan los ingresos por comisiones cobradas por el otorgamiento del crédito a que se refiere la presente sección.

Se entenderá como costos o gastos asociados con el otorgamiento del crédito, únicamente a aquéllos que sean incrementales y relacionados directamente con actividades realizadas por las entidades para otorgar el crédito, por ejemplo la evaluación crediticia del deudor, evaluación y reconocimiento de las garantías, negociaciones para los términos del crédito, preparación y proceso de la documentación del crédito, y cierre o cancelación de la transacción, incluyendo la proporción de la compensación a empleados directamente relacionada con el tiempo invertido en el desarrollo de esas actividades.

IFRS – IFRS 9 “Financial instruments” Los costos incrementales relacionados con la generación de contratos de administración de inversiones de largo plazo son parte integral de la tasa de interés efectiva de un instrumento financiero y estos se tratan como un ajuste a la tasa de interés efectiva, a menos que el instrumento financiero se mida a valor razonable, reconociendo los cambios en el valor razonable en el resultado del periodo.

Comisiones pagadas y recibidas por la colocación de créditos

CCSCGF - Anexo 33 (Circular Única de Bancos) B-6 “Cartera de crédito”

Las comisiones cobradas por el otorgamiento del crédito se registrarán como un crédito diferido, el cual se amortizará contra los resultados del ejercicio como un ingreso por intereses, bajo el método de línea recta durante la vida del crédito, excepto las que se originen por créditos revolventes que deberán ser amortizadas por un periodo de 12 meses.

IFRS – IFRS 9 “Financial instruments” / IFRS 15 “Revenue from contracts with customers”

Las comisiones cargadas por el servicio de préstamo no son una parte integrante de la tasa de interés efectiva de un instrumento financiero y se contabilizan de acuerdo con la IFRS 15. IFRS – IFRS 15 “Revenue from contracts with customers”

Los ingresos de actividades ordinarias derivados del uso, por parte de terceros, de activos de la entidad que producen intereses, regalías y dividendos deben ser reconocidos de acuerdo con las bases establecidas, siempre que:

(a) las partes del contrato lo hayan aprobado (por escrito, oralmente o de conformidad con otras prácticas comerciales habituales) y se hayan comprometido a satisfacer sus obligaciones respectivas;

(b) la entidad pueda identificar los derechos de cada una de las partes en relación con los bienes o servicios a transferir;

(c) la entidad pueda identificar las condiciones de pago en relación con los bienes o servicios a transferir

(d) el contrato tenga carácter comercial (es decir, se espera que el riesgo, el calendario o el importe de los flujos de efectivo futuros de la entidad cambien como resultado del contrato); y

(e) que sea probable que la entidad vaya a cobrar la contraprestación a que tendrá derecho a cambio de los bienes o servicios que se transferirán al cliente.

Los ingresos de actividades ordinarias deben reconocerse de acuerdo con las siguientes bases:

(a) los intereses deberán reconocerse utilizando el método del tipo de interés efectivo, como se establece en la IFRS 9;

(b) las regalías deben ser reconocidas utilizando la base de cumplimiento de obligaciones contractuales

Cuando se cobran los intereses de una determinada inversión, y parte de los mismos se han acumulado (o devengado) con anterioridad a su adquisición, se procederá a distribuir el interés total entre los periodos pre y post adquisición, procediendo a reconocer como ingresos de actividades ordinarias sólo los que corresponden al periodo posterior a la adquisición. Costo amortizado de un activo financiero o de un pasivo financiero es la medida inicial de dicho activo o pasivo menos los reembolsos del principal, más o menos la amortización acumulada—calculada con el método de la tasa de interés efectiva—de cualquier diferencia entre el importe inicial y el valor de reembolso en el vencimiento, y menos cualquier disminución por deterioro del valor o incobrabilidad (reconocida directamente o mediante el uso de una cuenta correctora). El método de la tasa de interés efectiva es un método de cálculo del costo amortizado de un activo o un pasivo financieros (o de un grupo de activos o pasivos financieros) y de imputación del ingreso o gasto financiero a lo largo del periodo relevante. La tasa de interés efectiva es la tasa de descuento que iguala exactamente los flujos de efectivo por cobrar o por pagar estimados a lo largo de la vida esperada del instrumento financiero (o, cuando sea adecuado, en un periodo más corto) con el importe neto en libros del activo financiero o pasivo financiero. Para calcular la tasa de interés efectiva, una entidad estimará los flujos de efectivo teniendo en cuenta todas las condiciones contractuales del instrumento financiero (por ejemplo, pagos anticipados, rescates y opciones de compra o similares), pero no tendrá en cuenta las pérdidas crediticias futuras. El cálculo incluirá todas las comisiones y puntos de interés pagados o recibidos por las partes del contrato, que integren la tasa de interés efectiva (ver la NIC 18 Ingresos de Actividades Ordinarias), así como los costos de transacción y cualquier otra prima o descuento. Se presume que los flujos de efectivo y la vida esperada de un grupo de instrumentos financieros similares pueden ser estimados con fiabilidad. Sin embargo, en aquellos raros casos en que esos flujos de efectivo o la vida esperada de un instrumento financiero (o de un grupo de instrumentos financieros) no puedan ser estimados con fiabilidad, la entidad utilizará los flujos de efectivo contractuales a lo largo del periodo contractual completo del instrumento financiero (o grupo de instrumentos financieros).

Reconocimiento del valor presente de contratos de seguros a largo plazo

CCSCGF - Anexo 33 (Circular Única de Bancos) B-6 “Cartera de crédito”

No se reconoce el valor presente de las ganancias futuras que se esperan obtener de los contratos de seguro a largo plazo. Las primas se reconocen cuando se cobran y las reservas son calculadas con base en lineamientos establecidos por la entidad reguladora de las empresas de seguro.

IFRS 4 – “Insurance contracts” Se reconoce el valor de los contratos de seguros clasificados como de largo plazo, vigentes a la fecha de los estados financieros. El valor presente de los contratos de seguro a largo plazo se determina descontando las ganancias futuras que se esperan obtener de los contratos vigentes usando supuestos que toman en cuenta las condiciones económicas y experiencia previa.

Estimación preventiva para riesgos crediticios

CCSCGF - Anexo 33 (Circular Única de Bancos) B-6 “Cartera de crédito” De acuerdo a las disposiciones relativas, la estimación preventiva para riesgos crediticios se determinará con base en las “Reglas para la Calificación de la Cartera Crediticia de las Instituciones de Banca Múltiple” y las “Reglas para la Calificación de la Cartera Crediticia de las Sociedades Nacionales de Crédito, Instituciones de Banca de Desarrollo” respectivamente, emitidas por la Secretaría de Hacienda y Crédito Público o las que las sustituyan. El monto de dicha estimación deberá determinarse con base en las diferentes metodologías establecidas o autorizadas por la CNBV para cada tipo de crédito, así como por las estimaciones adicionales requeridas en diversas reglamentaciones y las ordenadas y reconocidas por la CNBV, debiéndose registrar en los resultados del ejercicio del periodo correspondiente. La entidad deberá evaluar periódicamente si un crédito vencido debe permanecer en el balance general, o bien, ser castigado. Dicho castigo se realizará cancelando el saldo insoluto del crédito contra la estimación preventiva para riesgos crediticios. Cuando el crédito a castigar exceda el saldo de su estimación asociada, antes de efectuar el castigo, dicha estimación se deberá incrementar hasta por el monto de la diferencia. Las quitas, condonaciones, bonificaciones y descuentos, es decir, el monto perdonado del pago del crédito en forma parcial o total, se registrará con cargo a la estimación preventiva para riesgos crediticios. En caso de que el importe de éstas exceda el saldo de la estimación asociada al crédito, previamente se deberán constituir estimaciones hasta por el monto de la diferencia. Activos y pasivos financieros – valor razonable CCSCGF – Boletín C- 2 “Instrumentos financieros” Boletín C- 3 “Cuentas por cobrar”

NIF C-9 “Pasivos, provisiones, activos y pasivos contingentes y compromisos”

Activos financieros Bajo las NIF mexicanas la clasificación de los activos financieros es diferente, ya que excluye a los préstamos y cuentas por cobrar cuya guía para el registro, presentación y revelación es el Boletín C-3. El Boletín C-2 de Instrumentos Financieros establece las siguientes 3 categorías de clasificación:

Mantenidos hasta su vencimiento

Disponibles para la venta

Activos para negociación

Los costos de transacción directamente relacionados se registran como activos individuales y se amortizan utilizando el método de interés efectivo. Las NIF mexicanas no ofrecen una guía en particular en relación con la medición del valor razonable (oferta/demanda). Pasivos financieros Bajo las NIF mexicanas no existen diferentes clasificaciones de pasivos. En el caso de préstamos obtenidos en efectivo, el pasivo debe reconocerse por el importe recibido o utilizado. Los pasivos financieros que devengan intereses por financiamiento, deberán reconocerse por el total y en una cuenta complementaria de pasivo, los intereses por pagar conforme se vayan devengando. Las NIF no son explícitas respecto a incluir el riesgo crediticio en las mediciones de valor razonable.

IFRS – IFRS 9 “Financial instruments” Activos financieros Las IFRS establecen las siguientes 3 categorías para la clasificación de los activos financieros:

Activos financieros medido a costo amortizado

Activos financieros medidos a valor razonable con cambios en otro resultado integral

Activos financieros medidos a valor razonable con cambios en resultados

Bajo las IFRS, los costos de transacción directamente relacionados son capitalizados para todos los activos financieros a menos que sean clasificados en la categoría de activos medidos a valor razonable, en cuyo caso, se llevan a resultados u otro resultado integral en el momento que se originan. Bajo las IFRS, para la valuación de activos financieros, el precio de mercado apropiado para un activo mantenido es el precio de oferta, y para un activo que va a ser adquirido, es el precio de demanda. Pasivos financieros Las IFRS reconocen dos clases de pasivos financieros: 1) Pasivos financieros medidos inicialmente a valor razonable y subsecuentemente a costo amortizado usando el método del interés efectivo.

2) Pasivo financiero designados a valor razonable con cambios en resultados Una de las principales diferencias respecto de las NIIF versus las NIF es la utilización de ciertas partidas opcionales u obligatorias del valor razonable, el cual se define como el importe por el cual un activo podría ser intercambiado, o un pasivo cancelado, entre partes interesadas y debidamente informadas en condiciones de independencia mutua. Las NIIF han introducido este concepto en la medición de ciertas partidas de los estados de situación financiera, lo cual también implica que la información debe revisarse cada vez que se presentan estados financieros, puesto que los incrementos en el valor razonable de un activo son ingresos, mientras que los decrementos son gastos. En 2011, el IASB emitió IFRS 13, Fair Value Measurement misma que entró en vigor a partir del 1 de enero de 2013. Dicha norma establece una sola definición de “valor razonable” y proporciona orientación al respecto. Contingencias

CCSCGF – NIF C-9 “Pasivos, provisiones, activos y pasivos contingentes y compromisos” En el caso de medición de múltiples partidas, la mejor estimación corresponderá generalmente al “valor esperado”. También puede utilizarse el valor medio del intervalo, donde exista igualdad de oportunidad para la ocurrencia de cualquier punto en el rango de desenlaces. La mejor estimación para una sola obligación aislada puede ser el desenlace más probable, no obstante, deben considerar otros desenlaces posibles.

IFRS – IAS 37 “Provisions, contingents liabilities and contingents assets”

Se provisiona la mejor estimación de la obligación. En el caso de mediación de múltiples partidas, la mejor estimación corresponderá generalmente al “valor esperado”. También puede utilizarse el valor medio del intervalo, donde exista igualdad de oportunidad para la ocurrencia de cualquier punto en el rango de desenlaces. La mejor estimación para una sola obligación aislada puede ser el desenlace más probable, no obstante, deben considerarse otros desenlaces posibles. Ingresos

CCSCGF – NIF No existe reglamentación específica que trate el reconocimiento de ingresos bajo las normas locales (CCFCGF /NIF), incluyendo ingresos por intereses. Por lo que de acuerdo a lo establecido en la NIF A-8 “Supletoriedad”, se considerará la aplicación supletoria de la norma IFRS 15.

IFRS –IFRS 15 “Revenue from contracts with customers” / IFRS 9 “Financial instruments” La IFRS 15 “Revenue from contracts with customers” estipula que un contrato debe reconocerse cuando:

(a) las partes del contrato lo hayan aprobado (por escrito, oralmente o de conformidad con otras prácticas comerciales habituales) y se hayan comprometido a satisfacer sus obligaciones respectivas;

(b) la entidad pueda identificar los derechos de cada una de las partes en relación con los bienes o servicios a transferir;

(c) la entidad pueda identificar las condiciones de pago en relación con los bienes o servicios a transferir

(d) el contrato tenga carácter comercial (es decir, se espera que el riesgo, el calendario o el importe de los flujos de efectivo futuros de la entidad cambien como resultado del contrato); y

(e) que sea probable que la entidad vaya a cobrar la contraprestación a que tendrá derecho a cambio de los bienes o servicios que se transferirán al cliente.

De conformidad con la NIIF 9, el ingreso por intereses debe reconocerse utilizando el método de interés efectivo, el cual es definido como un método para calcular el costo amortizado del pasivo o activo financiero (o grupo de pasivos o activos) y de cargar ingreso o gasto financiero durante el período relevante. Consolidación

CCSCGF – NIF B 8 “Estados financieros consolidados o combinados” NIF C-7 “Inversiones en asociadas y otras inversiones permanentes” Criterio C-5 “Consolidación de entidades de propósito específico”

De conformidad con las NIF, y con los criterios contables de la CNBV, se deben consolidar todos los activos y pasivos de las entidades sobre las que la tenedora tiene control e influencia significativa; sin embargo, los criterios contables de la CNBV establecen una excepción en el caso de las sociedades de inversión y otras compañías no pertenecientes al sector financiero, aun cuando la tenedora tenga influencia sobre ellas, no deben consolidarse. En el caso de las NIF mexicanas no permiten la remedición al valor razonable de la inversión retenida en la fecha en que ocurre la pérdida del control de una entidad. La NIF B-8 “Estados financieros consolidados y combinados” (“NIF B-8”) estipula que las entidades que opten por presentar estados financieros no consolidados deben reconocer la inversión en las subsidiarias con el método de participación. La NIF C-7 “Inversiones en asociadas y otras inversiones permanentes” (“NIF C-7”) también estipula, como regla general, que la inversión en empresas asociadas deberá reconocerse mediante el método de participación. Bajo las NIF mexicanas, no es requerido evaluar la existencia de indicadores de deterioro de las inversiones en asociadas al término de cada periodo sobre el que se informa. La NIF C-7 establece que cuando el valor razonable de la contraprestación pagada es menor que el valor de la inversión en la asociada, este último debe ajustarse al valor razonable de la contraprestación pagada.

IFRS – IFRS 10 “Consolidated Financial Statements” / IAS 28 “Investments in Associates and Joint Ventures”

La IAS 27 “Separate Financial Statements” estipula que las inversiones en subsidiarias, negocios conjuntos y asociadas se contabilicen:

(a) Al costo o valor razonable; (b) De acuerdo con la IFRS 9 Instrumentos Financieros; o (c) Utilizando el método de participación tal como se describe en la IAS 28 Inversiones en

Asociadas y Negocios Conjuntos

Bajo las IFRS, se le requiere al inversionista evaluar al término de cada periodo sobre el que se informa si existe cualquier evidencia objetiva de que su interés en una asociada está deteriorado. Si el inversionista identifica esta evidencia, el importe total en libros de la inversión debe ser analizado para posible deterioro. Las IFRS se enfocan en el modelo basado en control, considerando los riesgos y beneficios en donde no existe un control aparentemente, para consolidar a las entidades. En raras circunstancias bajo IFRS puede existir control sobre una entidad en casos donde se posee menos del 50% de las acciones con derecho a voto y no se tienen derechos legales o contractuales para controlar la mayoría de los poderes de voto o al consejo de administración, es decir, el control de facto es cuando un accionista mayoritario mantiene una inversión en el capital importante con respecto a otros debido a que los accionistas están dispersos entre el público en general. Bajo las IFRS, si una empresa controladora pierde el control de una entidad, pero retiene una parte de la inversión, se requiere que la inversión retenida sea medida a valor razonable. Los estados financieros consolidados de la entidad controladora y la subsidiaria, usualmente se realizan a la misma fecha. Las IFRS permiten fechas distintas de reporte proporcionando una diferencia entre las fechas de reporte de tres meses. Bajo las IFRS se hacen ajustes en las operaciones más importantes en que se incurran en ese periodo. Las IFRS utilizan la presunción refutable de la influencia significativa con una participación del 20% o más. Sin embargo, se requiere efectuar un análisis sobre la existencia de influencia significativa. La IAS 28 “Investments in Associates” (“IAS 28”) permite el reconocimiento de un ingreso en la adquisición de una inversión en una empresa asociada cuando el neto de valor razonable de los activos y pasivos adquiridos es superior a la contraprestación entregada.

CCSCGF – Anexo 33 (CUB) B 6 “Cartera de crédito” El saldo a registrar en la cartera de crédito, será el efectivamente otorgado al acreditado y en su caso el seguro que se hubiere financiado. A este monto se le adicionarán cualquier tipo de intereses que, conforme al esquema de pagos del crédito, se vayan devengando.

El saldo insoluto de los créditos denominados en VSM se valorizará con base en el salario mínimo correspondiente, registrando el ajuste por el incremento contra un crédito diferido, el cual se reconocerá en los resultados del ejercicio en la parte proporcional que corresponda a un periodo de 12 meses como un ingreso por intereses. En caso de que antes de concluir el periodo de 12 meses hubiera una modificación a dicho salario mínimo, el saldo pendiente de amortizar se llevará a los resultados del ejercicio en el rubro de ingresos por intereses en esa fecha. En los casos en que el cobro de los intereses se realice por anticipado, éstos se reconocerán como un cobro anticipado en el rubro de créditos diferidos y cobros anticipados, el cual se amortizará durante la vida del crédito bajo el método de línea recta contra los resultados del ejercicio, en el rubro de ingresos por intereses. IFRS No existe una norma específica para el tratamiento de la cartera de crédito, por lo que se debe de considerar en lo establecido en las normas IFRS 15 “Revenue from contracts with customers” e IFRS 9 “Financial instruments”.

HALF­YEARLY FINANCIAL REPORT

JANUARY – JUNE

2020

1 Int er im Management Report 1 1 Int er im Consol idat ed Financial

St at ement s (Condensed)

1 Report on Economic Position

7 Report on Opportunities and Risks 8 Human Resources Report 9 Report on Expected Developments

11 Income Statement 12 Statement of Comprehensive Income 13 Balance Sheet 14 Statement of Changes in Equity 15 Cash Flow Statement 16 Notes to the Half­Yearly Consoli­dated Financial Statements 33 Responsibility Statement

VO L KSWA G E N F I N A N C I A L S E R V I C E S A G

€ million June 30, 2020 Dec. 31, 2019

Total assets 112,405 112,444

Loans to and receivables from customers attributable to

Retail financing 18,779 20,712

Dealer financing 4,522 5,413

Leasing business 38,757 39,951

Lease assets 23,792 22,776

Equity 11,926 12,029

€ million H1.2020 H1.2019

Operating profit 528 369

Profit before tax 542 418

Percent June 30, 2020 Dec. 31, 2019

Equity ratio1 10.6 10.7

Number June 30, 2020 Dec. 31, 2019

Employees 10,773 10,773

Germany 5,683 5,763

International 5,090 5,010

1 Eigenkapital / Bilanzsumme.

RAT I N G ( A S O F J U N E 3 0 ) S T A N D A R D & P OO R´ S M O O D Y´ S I N V E ST O R S S E R VI C E

Short­term Long­term Outlook Short­term Long­term Outlook

Volkswagen Financial Services AG A­2 BBB+ negative P­2 A3 negative

All figures shown in the report are rounded, so minor discrepancies may arise when amounts are added together. The comparative figures from the previous fiscal year are shown in parentheses directly after the figures for the current reporting period.

Key Figures

Interim Management Report 1Report on Economic Position

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

G L O BA L S P R E A D O F CO R O N AV I R U S ( S A R S ­ COV ­ 2 ) At the end of December 2019, initial cases of a new, some­times fatal lung disease emerged in Wuhan, in the Chinese province of Hubei. This disease is attributable to a novel coronavirus. Infections also began to appear outside China from mid­January 2020. In Europe, the number of people infected rose continuously in February, and especially in March and April 2020. The countries particularly badly affect­ed included the United Kingdom, Spain, Italy, France and Germany. While many areas throughout Europe recorded declining numbers of new infections as the second quarter of 2020 progressed, the rate of new infections continued to rise in North, Central and South America, Africa and parts of Asia. Especially in Europe and Asia, the second quarter saw the gradual easing of measures implemented to prevent the spread of the Covid­19 pandemic. This included partially lifting border controls and travel restrictions, relaxing lock­downs as well as the reopening of businesses and public facilities. In addition, the European Commission and numer­ous European governments approved assistance packages to support the economy. Outside of Europe, governments also introduced measures aimed at shoring up the economy to counteract the enormous disruption to everyday life and economic activity caused by the Covid­19 pandemic.

OV E R A L L A S S E S S M E N T O F T H E CO U R S E O F B U S I N E S S A N D T H E

G R O U P ’ S P O S I T I O N

Taking into account the reorganization of the legal entities, the operating result for the first half of the year was higher than the corresponding figure for the prior­year period.

New business around the globe declined over the course of the year to date but was nevertheless higher than the prior­year level.

In the first six months of 2020, Volkswagen Financial Services AG recorded a contraction in business volume com­pared with the position at the end of 2019, largely as a result of the impact from changes in exchange rates.

The global share of financed and leased new vehicles in the Group’s worldwide deliveries to customers (penetration) stood at 28.3 (25.5) % at the end of the first half of the year.

Funding costs were slightly above the prior­year level. This was attributable to both higher business volumes com­pared with the corresponding prior­year period and wider funding spreads.

In the first half of fiscal year 2020, the credit risk situation deteriorated slightly as a consequence of the decline in the volume of loans and receivables and the rise in risk costs resulting from the Covid­19 pandemic. Some of the impact was offset by targeted measures, such as the deferral of pay­

ments and assistance for the dealer organization provided jointly with the Group brands.

In the second quarter, the used vehicle market was affect­ed by the measures enacted by the government to combat the pandemic and the resulting consumer reticence. Changes in residual values are being very closely monitored. An appro­priate provision is being recognized for the existing portfolio on the basis of a regular portfolio assessment and monthly reviews. Targeted measures in coordination with the Group brands are helping to stabilize residual values. Additional risks arising from new business are being minimized. Gener­ally speaking, all new business is being entered into on the basis of forward­looking residual values that also take into account the current situation.

Because of the current conditions, the Board of Manage­ment of Volkswagen Financial Services AG considers the course of business in the year to date to have been challenging.

C H A N G E S I N E Q U I T Y I N V E STM E N T S

The following material changes in equity investments have occurred:

For business policy reasons, Volkswagen Financial Services AG, Braunschweig, acquired approximately 4 % of the shares in sunhill technologies GmbH, Erlangen, from the previous noncontrolling interest shareholders with effect from January 16, 2020, thereby increasing its shareholding to 100 %.

On February 3, 2020, Volkswagen Pon Financial Services B.V., Amersfoort, Netherlands, (60 % of the shares in which are held by Volkswagen Finance Overseas B.V., Amsterdam, Neth­erlands) acquired 58 % of the shares in the leasing company Muntstad Auto Lease B.V., Zeist, Netherlands, from Phima B.V., Nijkerk, Netherlands.

Effective February 14, 2020, Volkswagen Finance Over­seas B.V., Amsterdam, Netherlands, a wholly owned subsidi­ary of Volkswagen Financial Services AG, Braunschweig, acquired one share of Volkswagen Finance Belgium S.A., Brussels, Belgium, that had been previously held by Volkswagen Financial Services N.V., Amsterdam, Nether­lands; this transaction was carried out as a result of a change in Belgian company law. As a consequence, Volkswagen Finance Overseas B.V. now holds all of the shares in Volkswagen Finance Belgium S.A.

On February 21, 2020, Volkswagen Financial Services AG acquired 26 % of the shares in Glinicke Leasing GmbH, Kassel, from Glinicke Finanz Holding GmbH & Co. KG, Kassel. One of the aims of this equity investment is to include business bike leasing in the range of products offered to German fleet cus­tomers. In the meantime, the company has been renamed Digital Mobility Leasing GmbH.

Report on Economic Position

Report on Economic Position 2 Interim Management Report

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Effective March 4, 2020, Volkswagen Financial Services AG transferred the following equity investments to Volkswagen Finance Overseas B.V., Amsterdam, Netherlands, a wholly owned subsidiary of Volkswagen Financial Services AG, by means of a contribution in kind: > Its 100 % equity investment in sunhill technologies GmbH,

Erlangen > Its 100 % equity investment in PayByPhone Technologies

Inc., Vancouver, Canada > Its 60 % equity investment in Softbridge ­ Projectos Tecno­

lógicos S.A., Porto Salvo, Portugal

Effective March 6, 2020, Volkswagen Finance Luxemburg S.A., Strassen, Luxembourg, a wholly owned subsidiary of Volkswagen AG, Wolfsburg, made an equity investment equating to a 44 % interest in Mobility Trader Holding GmbH, Berlin, by way of a capital increase. Mobility Trader Hold­ing GmbH acts as an intermediate holding company for the local companies of the heycar Group.

On March 31, 2020, PayByPhone Technologies Inc., Van­couver, Canada, an indirect wholly owned subsidiary of Volkswagen Financial Services AG, acquired all shares in Mathom AG, Düdingen, Switzerland. Mathom AG is one of the leading providers of mobile payment solutions for park­ing based on its SEPP Parking product. The acquisition means that PayByPhone will expand its presence in the Swiss market to cover more than 70 cities, towns and municipalities. The Swiss market is a further element in PayByPhone’s strategy to become the leading provider of mobile payment solutions for parking in Europe and North America.

On March 31, 2020, Volkswagen Financial Services Ireland Ltd., Dublin, Ireland, a wholly owned subsidiary of Volkswagen Financial Services AG, Braunschweig, acquired the non­regulated business activities (mostly finance leases and dealer financing) from Volkswagen Bank GmbH, Ireland Branch, Dublin, Ireland.

On April 2, 2020, Volkswagen Finance Overseas B.V., Am­sterdam, Netherlands, a wholly owned subsidiary of Volkswagen Financial Services AG, Braunschweig, transferred all shares in sunhill technologies GmbH, Erlangen, to PayByPhone Technologies Inc., Vancouver, Canada, by means of a contribution in kind.

Effective May 28, 2020, Volkswagen Leasing GmbH, Braunschweig, transferred the entire portfolio of its branch in Warsaw, Poland, to the newly established Volkswagen Leasing Polen GmbH, Braunschweig, a wholly owned subsidiary of Volkswagen Financial Services AG, Braunschweig, by means of a spin­off. On May 29, 2020, Volkswagen Leasing Polen GmbH was merged into Volkswagen Financial Services Polska Sp. z o.o., Warsaw, Poland, a wholly owned subsidiary of Volkswagen Financial Services AG, Braunschweig. The purpose of the spin­off and merger was to support the inter­nal restructuring of the leasing business in Poland.

On June 3, 2020, Volkswagen Financial Services AG ac­quired all shares in the start­up business Voya GmbH, Ham­burg, from a consortium of investors. Voya is one of the lead­ing providers of state­of­the­art business travel management.

The innovative Voya platform enables business travelers and managers to record, administer and settle expenses for busi­ness travels using cutting­edge communications media based on smartphones and other devices. The acquisition broadens Volkswagen Financial Services AG’s mobility offering for fleet customers to include business travel management.

In the first half of 2020, Volkswagen Financial Services AG increased the equity of the following company to strengthen its capital resources:

> PayByPhone Technologies Inc., Vancouver, Canada

There were no further significant capital increases. G E N E R A L E CO N O M I C D E V E L O P M E N T

The global spread of the SARS­CoV­2 coronavirus, the associ­ated restrictions, and the resulting downturn in demand and supply meant that growth in the world economy was nega­tive in the first half of 2020. The average rate of expansion of gross domestic product (GDP) was far below the previous year’s level in both the advanced economies and the emerg­ing markets. At country level, performance in the reporting period depended on the extent to which the negative impacts of the global Covid­19 pandemic were already materializing. The governments and central banks of numerous countries throughout the world responded in some cases with substan­tial fiscal and monetary policy measures. This meant cuts in the already relatively low interest rates. There was a signifi­cant decline in prices for energy resources, while other com­modity prices were, on average, down slightly year­on­year. Currencies in some emerging markets depreciated distinctly in the first half of 2020. Global trade in goods declined fur­ther in the reporting period.

As a whole, the economies of Western Europe recorded a sharp fall in growth from January to June 2020. This trend was seen in all countries in Northern and Southern Europe. The impact of national measures to contain the pandemic, including border closures and spatial/physical distancing, caused deep cuts. In some regions, the measures severely restricted everyday life and also had grave economic conse­quences. During the second quarter, the governments of many European countries started to partially lift restrictions, thus giving rise to a slow economic recovery.

Germany recorded a markedly negative growth rate over the reporting period. The labor market was in a favorable situation at the start of the year, but many companies intro­duced short­time working throughout the course of the first half of the year. Both business and consumer sentiment saw only a modest improvement – despite the initial easing of restrictions in everyday life and economic activity as well as government assistance packages enacted to support the economy.

The economies in Central and Eastern Europe reported an overall marked decline in the real absolute GDP in the first six months of 2020. This development was also caused by the impact of national measures aimed at preventing the spread of the Covid­19 pandemic.

Interim Management Report 3Report on Economic Position

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

In Turkey, the recovery from the first quarter could not be sustained – the GDP growth rate was negative overall. South Africa’s GDP growth was sharply lower in the reporting peri­od amid persistent structural deficits and political challenges.

Growth in the US economy receded significantly amid rapidly increasing rates of infection in the first two quarters of 2020. To strengthen the economy in light of the negative impact of the Covid­19 pandemic, the US government passed comprehensive stimulus packages. The US Federal Reserve cut interest rates twice, alongside other measures to support the economy. The weekly number of people filing new claims for unemployment benefits rose by several million and led to a soaring increase in the unemployment rate. In the neigh­boring countries, economic output also fell compared to the same period of 2019, the fall being significant in Canada and sharp in Mexico.

Brazil’s economy also recorded a sharp drop from January to June 2020, resulting from the rising rate of infections caused by the Covid­19 pandemic. The economic downturn in Argentina intensified amid high inflation and continuous currency depreciation.

Economic output in China, which was exposed to the negative effects of the Covid­19 pandemic much earlier than other economies, fell in the reporting period; however, an increase was recorded in the second quarter. India registered a sharp fall in growth amid the rising number of infections. Japan also recorded a negative GDP growth compared to the same period of the previous year due to the adverse impact of the Covid­19 pandemic.

T R E N D S I N T H E M A R K E T S F O R F I N A N C I A L S E R V I C E S

Automotive financial services were in high demand, particu­larly in the first three months of 2020. This was attributable to a number of factors, notably the persistently low key inter­est rates in the main currency areas. Nevertheless, the report­ing period saw the Covid­19 pandemic exert downward pres­sure on the demand for financial services in virtually every region. The impact from the Covid­19 pandemic was noticea­ble around the globe, especially in the second quarter of 2020.

In the European passenger car market, the Covid­19 pan­demic mainly affected the second quarter of 2020, resulting in a very sharp contraction in demand for new and used vehicles over the reporting period as a whole. The propor­tions accounted for by new leases and financing agreements, after­sales products such as inspection, maintenance and spare parts agreements, and automotive insurance were maintained even though the absolute figures for such con­tracts declined.

In Germany, the number of new vehicles financed by loans or leases fell markedly in the reporting period, reflect­ing the challenges presented by the Covid­19 pandemic. Figures fell short of those in the corresponding prior­year period, predominantly because of the contraction in direct business and in loan finance for individual customers. Like­wise, there were fewer new contracts in connection with after­sales products.

Demand for financing and insurance products in South Afri­ca declined significantly.

Over the whole of the North America region, the Covid­19 pandemic caused a substantial fall in demand for new vehi­cles. In line with this trend, absolute figures for leases and financing agreements as well as for insurance contracts also decreased in the three North American markets in the first half of 2020. On the other hand, the proportions accounted for by leases and financing agreements in the first half of 2020 remained at the prior­year level in the US and even went up in the Canadian market. However, the proportions ac­counted for by leases and financing agreements in Mexico declined as a result of a lack of fleet business.

In the markets of the South America region, the spread of SARS­CoV­2 negatively impacted the demand for vehicles and automotive financial services, especially in the second quar­ter of 2020. In Brazil and Argentina, the number of contracts fell very sharply in the reporting period, but manufacturer penetration rates, i.e. the proportion of delivered vehicles financed by leases or other financing arrangements, never­theless increased.

In China, the passenger car market recovered from the Covid­19 pandemic at the beginning of the second quarter of 2020. The easing of the restrictions also led to a rise in con­tracts for automotive financial services, although the increase did not match the expansion in demand for vehicles. In the reporting period, the demand for both passenger cars and financial services was weaker than in the equivalent prior­year period. Japan saw lower demand for automotive finan­cial services products in the first half of 2020. Demand for financial services declined in India too, because of the persis­tently weak banking market and the spread of SARS­CoV­2.

The Covid­19 pandemic also led to a substantial drop in demand for commercial vehicles in the reporting period. This gave rise to a fall in leases and financing agreements in Eu­rope and Brazil, although the penetration rates for financing products rose.

T R E N D S I N T H E PA S S E N G E R C A R A N D L I G H T CO M M E R C I A L V E H I ­C L E S M A R K E T S

Global demand for passenger cars fell sharply year­on­year from January to June 2020 as a result of the Covid19 pandem­ic (– 28,1 %). The slump affected all sales regions, with above­average losses recorded in the overall markets of Western Europe and South America. The decline in demand in Asia­Pacific, North America, Central and Eastern Europe, the Mid­dle East and Africa was smaller by comparison.

Global demand for light commercial vehicles also de­creased sharply from January to June 2020 compared to the prior year.

In Western Europe, demand for passenger cars during the reporting period fell drastically short of the previous year’s level. The negative impact from the spread of the SARS­CoV­2 coronavirus was noticeable as early as March. New registrations saw declines on a similar scale in all major individual mar­kets, though the fall in demand slowed overall as the second

Report on Economic Position 4 Interim Management Report

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

quarter progressed. The passenger car markets in the UK, Italy and Spain lost around half their volume in the first six months of 2020.

The volume of new registrations of light commercial ve­hicles in Western Europe fell very sharply below the prior­year figure.

New passenger car registrations in Germany in the first half of 2020 did not match the high level seen in the equiva­lent period of the previous year. Demand here decreased by more than one­third, a trend amplified by the Covid­19 pan­demic and the associated restrictions and prohibitions.

Demand for light commercial vehicles in Germany in the reporting period was substantially lower than in the same period of 2019.

In the Central and Eastern Europe region, sales of passen­ger cars in the reporting period were substantially below the previous year’s level. The development of demand in the year to date has differed from market to market. While the EU countries of Central Europe registered shrinking demand from the beginning of the year, the Russian passenger car market remained relatively stable in the first quarter. It was not until the second half of the reporting period that the figures fell substantially short of the previous year as the SARS­CoV­2 coronavirus became increasingly widespread.

The volume of light commercial vehicles registered in Central and Eastern Europe decreased sharply compared to the same period in the preceding year, with a substantial year­on­year drop in the number of vehicles sold in Russia between January and June 2020.

The volume of the passenger car market in Turkey in the period from January to June 2020 was up by nearly one­third on the very low prior­year level. The growth in demand was bolstered by catch­up effects in the first three months of the year. In the second quarter, however, demand fell at times. In South Africa, the crisis meant that the number of passenger cars sold was down very sharply on the already poor results of the previous year.

In North America, too, sales of passenger cars and light commercial vehicles (up to 6.35 tonnes) declined substantial­ly in the reporting period compared with the prior year, with the effects of the Covid­19 pandemic worsening over the course of the second quarter. The market volume in the USA remained substantially down on the prior­year level. The decline affected both the passenger car segment and light commercial vehicles such as SUVs and pickup models. On the Canadian automotive market, the Covid­19 pandemic accel­erated the downward trend that began in 2018 very sharply. The number of vehicles sold in Mexico also fell very sharply below the comparable prior­year figure.

In the markets of the South America region, new registra­tions for passenger cars and light commercial vehicles de­creased drastically in the first six months of 2020. This region, along with Western Europe, saw the most severe impacts of the Covid­19 pandemic on the automotive markets in terms of percentage. In Brazil, the recovery in demand for cars stalled;

the number of new registrations was very much lower than the prior­year period. In the Argentinian market, the deterioration in the macroeconomic situation since mid­2018 and the spread of the SARS­CoV­2 coronavirus negatively impacted the demand for passenger cars and light commercial vehicles. Sales figures also fell very sharply there in the first half of 2020.

In the Asia­Pacific region, too, the first half of 2020 was ad­versely impacted by the spread of the SARS­CoV­2 coronavirus. The number of new passenger cars registered in the reporting period was down by around a quarter on the prior­year level. This was due primarily to developments on the Chinese pas­senger car market, where the volume of demand fell substan­tially short of the previous year as a result of the Covid­19 pandemic. After the drastic losses in the first three months of the year, there were clear signs of a recovery in the overall market during the second quarter. In the Indian passenger car market, sales in the period from January to June 2020 fell drastically compared with a year earlier. In Japan, vehicle demand in the first six months of 2020 was down substantial­ly on the previous year due not only to the Covid 19 pandemic, but also to the increase in VAT as of October 1, 2019.

There was a sharp year­on­year decline in demand for light commercial vehicles in the Asia­Pacific region. Registra­tion volumes in China, the region’s dominant market and the largest market worldwide, fell by around a quarter compared to the previous year. The number of new vehicle registrations in India saw a drastic decrease versus the prior year, while in Thailand the number was substantially below the level seen in the previous year.

T R E N D S I N T H E M A R K E T S F O R CO M M E R C I A L V E H I C L E S

In the markets that are relevant for the Volkswagen Group, global demand for mid­sized and heavy trucks with a gross weight of more than six tonnes was much lower in the re­porting period than in the prior year due to the spread of the SARS­CoV­2 coronavirus.

Demand in the 27 EU states excluding Malta, but includ­ing the United Kingdom, Norway and Switzerland (EU27+ 3), fell drastically short of the 2019 level in the first half of 2020. The previously anticipated downturn in the market was am­plified by the Covid­19 pandemic, especially in the second quarter of 2020. The Russian market recorded a marked downswing. Turkey reported a more than 40 % year­on­year increase in new registrations; however, the prior­year figures were very low. By contrast, the South African market declined at a similar rate.

In Brazil, the largest market in the South America region, demand for trucks was significantly below the level seen in the previous year as a result of the pandemic.

The bus markets were also very strongly impacted by the Covid­19 pandemic. Demand for buses in the EU27+ 3 coun­tries in the first half of 2020 was much lower than in the prior­year period, and the market for coaches in particular all but ground to a halt. Brazil and Mexico recorded a drastic year­on­year decline in demand.

Interim Management Report 5Report on Economic Position

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

F I N A N C I A L P E R F O R M A N C E

The disclosures on financial performance relate to the chang­es compared with the corresponding period in 2019.

Overall, Volkswagen Financial Services AG’s entities per­formed well in the first half of 2020. The operating result improved significantly, by 43.1 %, to €528 (369) million. This is mainly attributable to the fact that certain subsidiaries were not included, or were only included on a pro rata basis, in the operating result for the corresponding prior­year period.

Interest income from lending transactions and marketa­ble securities was slightly below the prior­year level at €994 million (– 4.7 %).

Net income from leasing transactions rose by 11.5 % year­on­year to €953 (855) million.

Interest expenses were slightly higher than the prior­year level at €665 million (+ 4.2 %).

Net income from service contracts amounted to €238 (94) million and was significantly above the prior­year figure.

Net income from insurance business was lower than in the prior­year period at €70 million (– 11.4 %).

The provision for credit risks of €288 (253) million was above the prior­year level. Credit risks to which the Volkswagen Financial Services AG Group is exposed as a result of various critical situations (Brexit, economic crises) in the United Kingdom, Russia, Brazil, Mexico, India and the Republic of Korea, were accounted for in the reporting period by recognizing valuation allowances. These remained un­changed in the first half of 2020.

The net fee and commission income amounted to €30 (8) million, significantly above the prior­year level.

General and administrative expenses were slightly higher than the prior­year period at €1,008 million (+ 1.1 %).

Net other operating income was significantly below the prior­year period at €132 million (– 30.9 %), particularly re­flecting a negative impact from foreign currency measure­ment (other than hedges).

The share of profits and losses of equity­accounted joint ventures amounted to €23 million, which was below the level of the prior­year period (– 11.5 %).

The net loss on miscellaneous financial assets of €6 million (previous year: net gain of €30 million) and the other components of profit or loss led to profit after tax for the Volkswagen Financial Services AG Group of €381 million, which represented a year­on­year increase (+ 29.6 %).

The German companies continued to account for the highest business volumes with 31.8 % of all contracts. N E T A S S E T S A N D F I N A N C I A L P O S I T I O N

The disclosures on net assets and financial position relate to the changes compared with the balance sheet date of Decem­ber 31, 2019. Lending business At €98.8 billion in total, loans to and receivables from cus­tomers and lease assets – which make up the core business of the Volkswagen Financial Services AG Group – accounted for approximately 88 % of the Group’s total assets.

The volume of retail financing lending went down by €1.9 billion to €18.8 billion (– 9.3 %), largely as a consequence of exchange rate effects. The number of new contracts was 488 thousand (– 8.9 % compared with the figure for the first half of 2019). The volume of current contracts declined to 2,850 thousand contracts (– 2.2 %).

The lending volume in dealer financing – which comprises loans to and receivables from Group dealers in connection with financing for inventory vehicles, as well as working capi­tal and investment loans – decreased to €4.5 billion (– 16.5 %).

Receivables from leasing transactions were slightly below the prior­year level at €38.8 billion (– 3.0 %). Lease assets rec­orded growth of €1.0 billion to €23.8 billion (+ 4.5 %).

A total of 610 thousand new leasing contracts were signed in the reporting period, clearly surpassing the figure for the first half of 2019 (+ 8.0 %). The number of leased vehicles as of June 30, 2020, was 3,477 thousand, a year­on­year increase of 3.5 %. As in previous years, the largest contribution came from Volkswagen Leasing GmbH, which had a contract port­folio of 1,510 (1,5931) thousand lease vehicles.

The total assets of Volkswagen Financial Services AG amounted to €112.4 (112.4) billion.

The number of service and insurance contracts as of June 30, 2020 was 8,573 (8,539) thousand. The total of 1,426 thousand new contracts was above the figure for the first half of 2019 (+ 11.0 %).

1 Prior­year figure adjusted.

Report on Economic Position 6 Interim Management Report

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

K E Y F I G U R E S BY S E G M E N T A S O F J U N E 3 0 , 2 0 2 0

in thousands GermanyUnited

Kingdom Sweden China Brazil MexicoOther

companies1

VW FS AGGroup

Current contracts 4,740 1,798 642 1,246 568 650 5,255 14,900

Retail financing ­ 9 85 1,206 411 215 923 2,850

of which: consolidated ­ 9 85 1,206 411 215 515 2,441

Leasing business 1,489 975 147 40 10 65 751 3,477

of which: consolidated 1,489 975 147 ­ 2 65 533 3,210

Service/insurance 3,251 814 411 ­ 147 370 3,581 8,573

of which: consolidated 3,251 772 226 ­ 85 370 2,075 6,779

New contracts 817 325 116 233 96 84 855 2,525

Retail financing ­ 5 15 226 62 24 157 488

of which: consolidated ­ 5 15 226 62 24 94 426

Leasing business 311 135 31 7 0 11 116 610

of which: consolidated 311 135 31 ­ 0 11 78 565

Service/insurance 506 185 71 ­ 33 49 583 1,426

of which: consolidated 506 175 40 ­ 25 49 319 1,113

€ million

Loans to and receivables from customers attributable to

Retail financing – 205 964 7,620 2,399 1,069 6,521 18,779

Dealer financing 9 4 130 859 340 355 2,824 4,522

Leasing business 18,277 14,656 1,197 – 13 416 4,198 38,757

Lease assets 15,140 2,709 1,590 – 3 102 4,248 23,792

Investment2 3,762 443 247 – – 1 944 5,397

Operating profit/loss – 11 220 30 77 73 67 71 528

Percent

Penetration3 62.3 52.0 62.7 14.2 35.1 48.5 28.3 28.3

of which: consolidated 62.3 52.0 62.7 14.1 34.8 48.5 18.4 26.0

1 The Other Companies segment covers the following markets: Australia, Belgium, France, India, Italy, Ireland, Japan, Korea, Poland, Portugal, Russia, Spain, the Czech Republic. Relating to the number of contracts and penetration, it also covers the following markets: Argentina, the Netherlands, Norway, Switzerland, South Africa, Taiwan and Turkey. It also includes the Volkswagen Financial Services AG holding company, the holding and financing companies in Belgium, France and the Netherlands, EURO­Leasing companies in Denmark, Germany and Poland, Volkswagen Insurance Brokers GmbH, Volkswagen Versicherung AG and effects of consolidation.

2 Corresponds to additions to lease assets classified as noncurrent assets. 3 Ratio of new contracts for new Group vehicles under retail financing and leasing business to deliveries of Group vehicles.

Deposit business and borrowings The significant liability items were liabilities to banks in the amount of €13.4 billion (– 7.2 %), liabilities to customers amounting to €15.4 billion (– 1.9 %) and notes and commer­cial paper issued amounting to €62.7 billion (+ 2.9 %).

Equity The subscribed capital remained unchanged at €441 million in the reporting period. Equity in accordance with IFRSs was €11.9 (12.0) billion. This resulted in an equity ratio of 10.6 % based on total assets of €112.4 billion.

Interim Management Report 7Report on Opportunities and Risks

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

R E P O R T O N O P P O RT U N I T I E S

Macroeconomic opportunities The worldwide spread of SARS­CoV­2 is having a substantial adverse impact throughout society and across all areas of economic life. In particular, it continues to be difficult to assess the consequences for further growth in individual national economies or the global economy as a whole. Volkswagen Financial Services AG’s Board of Management expects deliveries to customers of the Volkswagen Group to be significantly below the prior­year level. Nevertheless, Volkswagen Financial Services AG predicts that there will be a nascent economic recovery during the course of 2020. Strategic opportunities In addition to maintaining its international focus by tapping into new markets, Volkswagen Financial Services AG believes that developing innovative products that are tailored to cus­tomers’ changing mobility requirements offers additional opportunities. Growth areas such as mobility products and service offerings are being systematically developed and expanded. Further opportunities may be created by launch­ing established products in new markets.

The digitalization of its business represents a significant opportunity for Volkswagen Financial Services AG. The aim is to ensure that all key products are also available online

around the world, thereby enabling the Company to enhance efficiency. By expanding digital sales channels, Volkswagen Financial Services AG is promoting direct sales and facilitat­ing the extension of the used vehicle financing platform. In this way, changing customer needs are addressed and the competitive position of Volkswagen Financial Services AG reinforced.

R I S K R E P O R T

Volkswagen Financial Services AG has been strongly affected by the impact from the Covid­19 pandemic.

There was a disproportionately high fall in the Volkswagen Group’s deliveries to customers in the Western European and South American markets. The decline was less severe in North America and in Central and Eastern Europe, while a slight recovery had already taken hold in the Asia­Pacific region at the end of the reporting period. Volkswagen Financial Services AG’s Board of Management therefore expects that financial services products designed to promote sales will be significantly below the prior­year level.

In the reporting period, there were no material changes to the details regarding the Internal Control System and Internal Risk Management System set out in the report on opportuni­ties and risks in the 2019 Annual Report.

Report on Opportunities and Risks

Human Resources Report 8 Interim Management Report

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Volkswagen Financial Services AG had 10,518 active employ­ees worldwide as of June 30, 2020. In addition to the active workforce in the first half of this year, Volkswagen Financial Services AG had 109 employees who had reached the passive phase of their partial retirement agreements, and 146 voca­tional trainees. The total number of employees at Volkswagen Financial Services AG as of June 30, 2020 was

therefore 10,773, a figure unchanged compared with the headcount of 10,773 at the end of 2019.

Currently, 5,683 people are employed in Germany. Owing to economic considerations, 294 employees of

Volkswagen Servicios S.A. de C.V., Puebla, Mexico, which is an unconsolidated company, are included in the overall work­force figures.

Human Resources Report

Interim Management Report 9Report on Expected Developments

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

The Board of Management of Volkswagen Financial Services AG predicts that there will be negative growth in the global economy in 2020 as a consequence of the spread of SARS­CoV­2. It still believes that risks will also arise from protec­tionist tendencies, turmoil in financial markets and structur­al deficits in individual countries. In addition, growth pro­spects will be adversely impacted by continuing geopolitical tensions and conflicts. Volkswagen Financial Services AG anticipates that both the advanced economies and emerging markets will experience a considerable decline in economic growth. Nevertheless, a nascent economic recovery is pre­dicted during the course of 2020.

In response to the Covid­19 pandemic, we have developed scenarios for the development of the passenger car markets in individual regions in 2020 which, for example, also take account of the trends currently being experienced in China. The scenarios reflect the different timings of the spread of the Covid­19 pandemic in the various geographic regions. In all, we expect the volume of global demand for new vehicles in 2020 to be between 15 and 20 % lower than it was the previ­ous year. In Western Europe, we anticipate a fall of around 25 % in the volume of new passenger car registrations in 2020 compared to the prior year. Following the drastic decline at the beginning of the second quarter and the marked recovery over the course of the three months, we believe that the mar­ket will continue to recover in the third and fourth quarters of 2020, with prior­year levels being reached in individual months. We have assumed a similar but more stable trend for the passenger car markets in Central and Eastern Europe and expect the year­on­year fall in the number of sales in 2020 to be somewhat less sharp here. The volume of demand in the markets for passenger cars and light commercial vehicles (up to 6.35 tonnes) in North America in 2020 is likely to be 25 to 30 % lower than in the prior year. We anticipate that following the drastic decline at the beginning of the second quarter and a slight recovery as the period progressed, the remaining quarters of 2020 will register only a sideways trend in the market. We expect to see new registrations of passenger cars and light commercial vehicles in the South American markets fall by up to 40 % in 2020 compared with the previous year. After the drastic decline in the second quarter, the market is expected to witness only a slow and gradual recovery in the third and fourth quarters, though falling short of the levels recorded in the previous year. The passenger car markets in the Asia­Pacific region are likely to be between 10 and 15 % below the prior­year level in 2020. After the very sharp de­

cline in the first three months and the rapid rebound in the second quarter, we expect a return to prior­year levels in the remaining quarters of 2020.

Trends in the markets for light commercial vehicles in the individual regions will also be mixed in 2020; on the whole, we anticipate a marked fall in demand due to Covid­19.

In the markets relevant for the Commercial Vehicles Business Area, we expect a substantial year­on­year fall in 2020 of new registrations for both mid­sized and heavy trucks with a gross weight of more than six tonnes and for buses.

The Company believes that automotive financial services will continue to be extremely important for vehicle sales worldwide in 2020.

Forecasting the interest rate risk at Group level is only possible to a limited extent because of the need to include different interest rate zones.

It is anticipated that interest rates will remain steady or will fall in the majority of interest rate zones.

The interest rate risk is monitored continuously. Potential changes in interest rates are simulated if necessary to deter­mine their effect on profits.

Volkswagen Financial Services AG’s forecasts were based on the assumption that global economic growth in 2020 would be on a level with the previous year. It was predicted that risks would arise as a result of protectionist trends, tur­moil on financial markets and structural deficits in individual countries. In addition, growth prospects would be negatively impacted by continuing geopolitical tensions and conflicts. It was anticipated that momentum in both the advanced econ­omies and the emerging markets would be similar to that seen in 2019.

Since the Covid­19 pandemic, all assumptions have been or are being revised, taking into account government econom­ic stimulus packages and statutory deferral arrangements. In general terms, Volkswagen Financial Services AG expects to see rising risk costs, a liquidity squeeze for dealers and a fall in sales as a result of an increase in unemployment and insol­vencies. As vehicle inventories expand, residual values could tend to fall, leading to a further increase in risk costs.

The Board of Management of Volkswagen Financial Services AG predicts that there will be a negative impact on the operating result for fiscal year 2020, which will be dis­tinctly below the prior­year figure.

Taking into account the restructuring of legal entities car­ried out during 2019, it is projected that new contracts and

Report on Expected Developments

Report on Expected Developments 10 Interim Management Report

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

the penetration rate will rise compared with the prior year. Contract portfolio and business volume will remain on prior­year level.

On the basis of the forecasts for business performance and operating result, it is anticipated that there will be a year­on­year deterioration in return on equity and in the cost/income ratio in 2020.

This report contains forward­looking statements on the future business development of Volkswagen Financial Services AG. These statements are based on assumptions relating to the development of the economic and legal environment in individual countries and economic regions in terms of the global economy and of the financial and automotive markets, which Volkswagen Financial Services AG has made on the basis of the information available and which it currently considers to be realistic. The estimates given entail a degree of risk, and the actual developments may differ from those forecast. Any unexpected fall in demand or economic stagnation in the key sales markets of the

Volkswagen Group will have a corresponding impact on the development of its business.The same applies in the event of material changes in exchange rates against the euro. The same applies should the actual effects of the Covid­19 pandemic differ from the scenario assumed in this report. In addition, expected business development may vary if the assessments of the key performance indicators and of risks and opportunities presented in the 2019 Annual Report do not develop in line with current expectations, or additional risks and opportunities or other factors emerge that affect the development of the business.

Interim Consolidated Financial Statements (Condensed) 11Income Statement

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Income Statement of the Volkswagen Financial Services AG Group

€ million NoteJan. 1 – June 30,

2020Jan. 1 – June 30,

2019 Change in percent

Interest income from lending transactions and marketable securities 994 1,043 – 4.7

Income from leasing transactions 8,040 5,541 45.1

Depreciation, impairment losses and other expenses from leasing transactions – 7,086 – 4,686 51.2

Net income from leasing transactions 953 855 11.5

Interest expense – 665 – 638 4.2

Income from service contracts 994 794 25.2

Expenses from service contracts – 756 – 700 8.0

Net income from service contracts 238 94 X

Income from insurance transactions 177 159 11.3

Expenses from insurance transactions – 107 – 80 33.8

Net income from insurance business 70 79 – 11.4

Provision for credit loss risks – 288 – 253 13.8

Fee and commission income 249 206 20.9

Fee and commission expenses – 219 – 199 10.1

Net fee and commission income 30 8 X

Net gain/ loss on hedges – 10 10 X

Net gain/loss on financial instruments measured at fair value and on derecognition of financial assets measured at fair value through other comprehensive income 81 – 24 X

General and administrative expenses 1 – 1,008 – 997 1.1

Other operating income 722 377 91.5

Other operating expenses – 590 – 186 X

Net other operating income/expenses 132 191 –30.9

Operating result 528 369 43.1

Share of profits and losses of equity­accounted joint ventures 23 26 –11.5

Net gain/loss on miscellaneous financial assets – 6 30 X

Other financial gains/losses – 3 – 6 –50.0

Profit before tax 542 418 29.7

Income tax expense – 162 – 125 29.6

Profit after tax 381 294 29.6

Profit after tax attributable to noncontrolling interests 0 0 –

Profit after tax attributable to Volkswagen AG 381 294 29.6

German GAAP profit/loss attributable to Volkswagen AG in the event of loss absorption/profit transfer – 254 – 67 X

Interim Consolidated Financial Statements (Condensed)

Statement of Comprehensive Income 12 Interim Consolidated Financial Statements (Condensed)

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Statement of Comprehensive Income of the Volkswagen Financial Services AG Group

€ million Jan. 1 – June 30, 2020 Jan. 1 – June 30, 2019

Profit after tax 381 294

Pension plan remeasurements recognized in other comprehensive income Pension plan remeasurements recognized in other comprehensive income, before tax – 6 – 99Deferred taxes relating to pension plan remeasurements recognized in other comprehensive income 1 30

Pension plan remeasurements recognized in other comprehensive income, net of tax – 5 – 70Fair value valuation of other participations and securities (equity instruments) that will not be reclassified to profit or loss, net of tax – –Share of other comprehensive income of equity­accounted investments that will not be reclassified to profit or loss, net of tax 0 0Items that will not be reclassified to profit or loss – 5 – 69

Exchange differences on translating foreign operations Gains/losses on currency translation recognized in other comprehensive income – 578 – 16Transferred to profit or loss – –Exchange differences on translating foreign operations, before tax – 578 – 16Deferred taxes relating to exchange differences on translating foreign operations – –

Exchange differences on translating foreign operations, net of tax – 578 – 16Hedging Fair value changes recognized in other comprehensive income (OCI I) 91 – 18Transferred to profit or loss (OCI I) – 102 10Cash flow hedges (OCI I), before tax – 11 – 8Deferred taxes relating to cash flow hedges (OCI I) 2 1

Cash flow hedges (OCI I), net of tax – 9 – 6Fair value changes recognized in other comprehensive income (OCI II) 0 0Transferred to profit or loss (OCI II) 0 –Cash flow hedges (OCI II), before tax 0 0Deferred taxes relating to cash flow hedges (OCI II) 0 0

Cash flow hedges (OCI II), net of tax 0 0Fair value valuation of securities and receivables (debt instruments) that may be reclassified to profit or loss Fair value changes recognized in other comprehensive income – 1 5Transferred to profit or loss 0 1Fair value valuation of securities and receivables (debt instruments) that may be reclassified to profit or loss, before tax 0 6Deferred taxes relating to fair value valuation of securities and receivables (debt instruments) recognized in other comprehensive income 0 – 2

Fair value valuation of securities and receivables (debt instruments) that may be reclassified to profit or loss, net of tax 0 4Share of other comprehensive income of equity­accounted investments that may be reclassified to profit or loss, net of tax – 36 5Items that may be reclassified to profit or loss – 623 – 13

Other comprehensive income, before tax – 631 – 112Deferred taxes relating to other comprehensive income 3 29

Other comprehensive income, net of tax – 628 – 83Total comprehensive income – 247 211Profit/loss after tax attributable to noncontrolling interests 0 0Total comprehensive income attributable to Volkswagen AG – 247 211

Interim Consolidated Financial Statements (Condensed) 13Balance Sheet

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Balance Sheet of the Volkswagen Financial Services AG Group

€ million Note June 30, 2020 Dec. 31, 2019 Change in percent

Assets Cash reserve 48 106 – 54.7Loans to and receivables from banks 5,633 2,477 XLoans to and receivables from customers attributable to

Retail financing 18,779 20,712 – 9.3Dealer financing 4,522 5,413 –16.5Leasing business 38,757 39,951 – 3.0Other loans and receivables 12,938 13,119 – 1.4

Total loans to and receivables from customers 74,996 79,195 – 5.3Derivative financial instruments 937 736 27.3Marketable securities 298 305 – 2.3Equity­accounted joint ventures 712 737 – 3.4Miscellaneous financial assets 613 591 3.7Intangible assets 2 83 91 – 8.8Property and equipment 2 508 498 2.0Lease assets 2 23,792 22,776 4.5Investment property 16 17 – 5.9Deferred tax assets 1,396 1,513 – 7.7Current tax assets 180 125 44.0Other assets 3,192 3,276 – 2.6Total 112,405 112,444 0.0

€ million Note June 30, 2020 Dec. 31, 2019 Change in percent

Equity and liabilities Liabilities to banks 13,424 14,472 – 7.2Liabilities to customers 15,439 15,740 – 1.9Notes, commercial paper issued 62,718 60,943 2.9Derivative financial instruments 387 427 – 9.4Provisions for pensions and other post­employment benefits 513 505 1.6Underwriting provisions and other provisions 882 940 – 6.2Deferred tax liabilities 648 655 – 1.1Current tax liabilities 320 373 – 14.2Other liabilities 1,479 1,413 4.7Subordinated capital 4,670 4,947 – 5.6Equity 11,926 12,029 – 0.9

Subscribed capital 441 441 –Capital reserves 3,216 3,216 –Retained earnings 9,747 9,228 5.6Other reserves – 1,481 – 859 72.4Equity attributable to noncontrolling interests 2 2 –

Total 112,405 112,444 0.0

Statement of Changes in Equity 14 Interim Consolidated Financial Statements (Condensed)

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Statement of Changes in Equity of the Volkswagen Financial Services AG Group

O T H ER R E S ER V E S

Hedging transactions

€ million Subscribed

capitalCapital

reservesRetained earnings

Currency translation

Cash flowhedges

(OCI I)

Deferredhedging

costs(OCI II)

Equity and debt

instruments

Equity­accounted

investments

Non­controlling

interestsTotal

equity

Balance as of Jan. 1, 2019 441 1,600 6,812 – 759 3 – 1 – 84 2 8,016

Profit after tax – – 294 – – – – – 0 294

Other comprehensive income, net of tax – – – 70 – 16 – 6 0 4 5 0 – 83

Total comprehensive income – – 224 – 16 – 6 0 4 5 0 211

Changes due to contribution in kind by the shareholder Volkswagen AG – 348 2,062 – 48 0 0 – – – 2,361

Capital increases – 1,000 – – – – – – – 1,000

Distribution of net retained profits – – – 1,000 – – – – – – – 1,000

Other changes1 – – 67 – – – – – – 67

Balance as of June 30, 2019 441 2,947 8,165 – 823 – 4 0 5 – 79 2 10,654

Balance as of Jan. 1, 2020 441 3,216 9,228 – 772 – 5 0 1 – 82 2 12,029

Profit after tax – – 381 – – – – – 0 381

Other comprehensive income, net of tax – – – 5 – 577 – 9 0 0 – 36 0 – 628

Total comprehensive income – – 376 – 577 – 9 0 0 – 36 0 – 247

Capital increases – – – – – – – – – –

Other changes2 – – 144 – – – – – – 144

Balance as of June 30, 2019 441 3,216 9,747 – 1,350 – 13 0 1 – 119 2 11,926

1 Includes German GAAP (HGB) profit/loss attributable to Volkswagen AG in the event of loss absorption/profit transfer. 2 Includes German GAAP (HGB) profit/loss attributable to Volkswagen AG in the event of loss absorption/profit transfer, effects of full consilidation of Volkswagen Financial Services

Ireland Ltd., Dublin, Volkswagen Insurance Services, Correduria de Seguros, S.L., El Prat de Llobregat, and Volkswagen Financial Services Polska Sp. z o.o., Warsaw, as well as the difference of the purchase of the Irish business portfolio

Interim Consolidated Financial Statements (Condensed) 15Cash Flow Statement

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Cash Flow Statement of the Volkswagen Financial Services AG Group

€ million Jan. 1 – June 30, 2020 Jan. 1 – June 30, 2019

Profit before tax1 542 418

Depreciation, amortization, impairment losses and reversals of impairment losses 2,343 1,631

Change in provisions – 9 95

Change in other noncash items 261 – 27

Gain/loss on disposal of financial assets and items of property and equipment 0 0

Net interest expense and dividend income – 1,210 – 1,024

Other adjustments 0 3

Change in loans to and receivables from banks – 3,253 – 2,940

Change in loans to and receivables from customers 2,275 – 899

Change in lease assets – 3,501 – 2,968

Change in other assets related to operating activities 24 28

Change in liabilities to banks – 271 190

Change in liabilities to customers – 115 – 3,185

Change in notes, commercial paper issued 3,090 7,937

Change in other liabilities related to operating activities 19 – 11

Interest received 1,874 1,657

Dividends received 1 5

Interest paid – 666 – 638

Income taxes paid – 208 – 314

Cash flows from operating activities 1,196 – 42

Proceeds from disposal of investment property 1 –

Acquisition of investment property – –

Proceeds from disposal of subsidiaries and joint ventures 0 0

Acquisition of subsidiaries and joint ventures – 1,380 – 32

Proceeds from disposal of other assets 5 5

Acquisition of other assets – 26 – 23

Change in investments in marketable securities – 5 – 14

Cash flows from investing activities – 1,405 – 64

Proceeds from changes in capital – 1,000

Distribution to Volkswagen AG – – 1,000

Loss assumed by Volkswagen AG 268 149

Change in cash funds attributable to subordinated capital – 99 – 42

Repayment of lease liabilities2 – 13 – 9

Cash flows from financing activities 156 98

Cash and cash equivalents at end of prior period 106 54

Cash flows from operating activities 1,196 – 42

Cash flows from investing activities – 1,405 – 64

Cash flows from financing activities 156 98

Effect of exchange rate changes – 5 4

Cash and cash equivalents at end of period 48 50 1 For the presentation of cash flows from operating activities the profit before tax will now be used. Prior year figures have been adjusted. 2 Separate presentation of outflows from lessees for repayment of the liabilities arising from leasing contracts. Prior year figures have been adjusted.

See note (6) for disclosures on the cash flow statement.

16

Interim Consolidated Financial Statements (Condensed)Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

of the Volkswagen Financial Services AG Group as of June 30, 2020

General Information

Volkswagen Financial Services Aktiengesellschaft (VW FS AG) has its registered office at Gifhorner Strasse, Braunschweig, Germany, and is registered in the Braunschweig commercial register (HRB 3790).

Volkswagen AG, Wolfsburg, is the sole shareholder of the parent company, VW FS AG. Volkswagen AG and VW FS AG have entered into a control and profit­and­loss transfer agreement.

Basis of Presentation

VW FS AG prepared its consolidated financial statements for the year ended December 31, 2019 in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), and the inter­pretations issued by the International Financial Reporting Standards Interpretations Committee (IFRS IC) as well as in accordance with the additional disclosures required by German commercial law under section 315a(1) of the Handelsgesetzbuch (HGB – German Commercial Code). These interim consolidated financial statements for the period ended June 30, 2020 have therefore also been prepared in accordance with IAS 34 and represent a condensed version compared with the full consolidated financial statements. No review of these interim financial statements has been carried out by an auditor.

Unless otherwise stated, amounts are shown in millions of euros (€ million). All amounts shown are round­ed, so minor discrepancies may arise when amounts are added together.

Accounting Policies

VW FS AG has applied all financial reporting standards adopted by the EU which are subject to mandatory ap­plication starting January 1, 2020. The discount rate applied to German pension provisions reported in these interim consolidated financial statements was 1.1% (December 31, 2019: 1.1%).

The income tax expense for the interim consolidated financial statements has been calculated in accord­ance with IAS 34 (Interim Financial Reporting) using the average tax rate anticipated for the entire fiscal year.

Otherwise, the same consolidation methods and accounting policies as those applied in the 2019 consoli­dated financial statements have generally been used in the preparation of the interim consolidated financial statements and the calculation of the prior­year comparative figures. A detailed description of these methods and policies was published in the notes to the consolidated financial statements in the 2019 Annual Report.

In addition, the effects of new standards were described in detail under “New and Revised IFRSs Not Ap­plied”. The 2019 Consolidated Financial Statements can also be accessed on the Internet at www.vwfs.com/arvwfsag19.

Notes to the Interim Consoli­dated Financial Statements

17Interim Consolidated Financial Statements (Condensed) Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

The preparation of the half­yearly consolidated financial statements requires management to make certain estimates and assumptions that affect the recognition and measurement of assets, liabilities, income and ex­penses, and disclosures relating to contingent assets and liabilities for the reporting period. As future business performance is subject to unknown factors that, in part, lie outside the control of the Group, assumptions and estimates are subject to uncertainty. In particular, the global spread of coronavirus (SARS­CoV­2) is leading to heightened uncertainty because it is having a substantially adverse impact throughout society and in all areas of economic life. Furthermore, the consequences for the further growth in individual national economies and in the global economy as a whole cannot be reliably projected at present. For further information in this regard please refer to the details in the Report on Economic Position and the Report on Opportunities and Risks in the Interim Management Report.

Changes in residual values continue to be very closely monitored because of their importance in relation to the recoverable amounts of lease assets, which particularly depend on the residual value of the lease vehicles at the end of the lease term. An appropriate provision is continuing to be recognized for the existing portfolio on the basis of a regular portfolio assessment and monthly reviews. Targeted measures in coordination with the Group brands are helping to stabilize residual values.

As regards the recoverability of financial assets, targeted measures such as the deferral of payments and as­sistance for the dealer organization provided jointly with the Group brands are offsetting some of the impact from a slight overall deterioration in the credit risk situation.

Impairment tests carried out in the previous year were reviewed in the first half of fiscal year 2020 to assess whether there had been any further impairment of goodwill or of joint ventures classified as material. The VW FS AG Group is currently assuming that the pandemic is a temporary event that will not have a permanent negative effect on the long­term performance of the Group and therefore adjusted the planning years 2020 and 2021 in line with current expectations for the purposes of the tests. In addition, cost of capital rates were updat­ed for the first half of fiscal year 2020 and individual measurement parameters were adjusted. Overall, the tests did not give rise to any requirement for the recognition of additional impairment losses in respect of the assets referred to above.

18

Interim Consolidated Financial Statements (Condensed)Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Basis of Consolidation

In addition to VW FS AG, the consolidated financial statements cover all significant German and non­German subsidiaries, including structured entities, controlled directly or indirectly by VW FS AG. This is the case if VW FS AG has power over potential subsidiaries directly or indirectly from voting rights or similar rights, is exposed, or has rights to, positive or negative variable returns from its involvement with the potential subsidi­aries, and has the ability to use its power to influence those returns. The following subsidiaries, which had not previously been consolidated for reasons of materiality, were consol­idated in the reporting period: > Volkswagen Financial Services Ireland Ltd., Dublin > Volkswagen Insurance Services, Correduria de Seguros, S.L., El Prat de Llobregat > Volkswagen Financial Services Polska Sp. z o.o., Warsaw

As of March 31, 2020, Volkswagen Financial Services Ireland Ltd., Dublin, acquired the Irish business portfolio (a business within the meaning of IFRS 3) of Volkswagen Bank GmbH, Ireland Branch, Dublin, for a purchase price of €1,328 million. The portfolio primarily consists of finance lease and dealer financing business. As the trans­actions were under the common control of Volkswagen AG, the transferred assets and liabilities were measured using the existing group carrying amounts on the date of initial recognition (known as predecessor account­ing). The difference between the acquired assets and liabilities and the purchase price amounted to €89 million and was recognized in equity. The breakdown of the carrying amounts of the assets and liabilities on the acquisition date was as follows:

IFRS carrying amounts on the

date of initial recognition

Mio. €

Loans to and receivables from customers attributable to 1,244

Dealer financing 185

Leasing business 1,039

Other loans and receivables 20

Other assets 3

Total assets 1,247

Liabilities to customers 6

Current tax liabilities 2

Total liabilities 8

Net assets 1,239

As part of an internal restructuring of the leasing business in Poland, the entire portfolio of the Warsaw branch of Volkswagen Leasing GmbH, Braunschweig, was spun off in May 2020 and transferred to Volkswagen Leasing Polen GmbH, Braunschweig, by way of a capital contribution in kind. Volkswagen Leasing Polen GmbH was then merged into Volkswagen Financial Services Polska Sp. z o.o., Warsaw, Poland. In June 2020, VW FS AG acquired all the shares in the start­up business Voya GmbH, Hamburg, from a consorti­um of investors. Voya is one of the leading providers of state­of­the­art business travel management. The entity is not consolidated for reasons of materiality. In February 2020, VW FS AG acquired 26% of the shares in Glinicke Leasing GmbH, Kassel. The company has now been renamed Digital Mobility Leasing GmbH. For reasons of materiality, the 26% equity investment in this associate is not accounted for using the equity method.

19Interim Consolidated Financial Statements (Condensed) Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Interim Consolidated Financial Statements Disclosures

1. General and Administrative Expenses

€ million Jan. 1 – June 30, 2020 Jan. 1 – June 30, 2019

Personnel expenses – 452 – 401

Non­staff operating expenses – 539 – 550

Advertising, public relations and sales promotion expenses – 19 – 17

Depreciation of and impairment losses on property and equipment, amortization of and impairment losses on intangible assets – 38 – 30

Other taxes – 4 – 3

Income from the reversal of provisions and accrued liabilities 45 5

Total – 1,008 – 997

2. Changes in Selected Assets

€ million

Net carrying amount as of

January 1, 2020

Basis of consolidation

additions/changesDisposals/other

changes

Depr./amort./

impairment

Net carrying amount as of June 30, 2020

Intangible assets 91 10 – 7 10 83

Property and equipment 498 53 – 15 28 508

Lease assets 22,776 7,722 – 4,487 2,219 23,792

20

Interim Consolidated Financial Statements (Condensed)Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

3. Classes of Financial Instruments

Financial instruments are divided into the following classes in the VW FS AG Group: > Measured at fair value > Measured at amortized cost > Derivative financial instruments designated as hedges > Not allocated to any measurement category > Credit commitments and financial guarantees (off­balance­sheet)

The following table shows a reconciliation of the balance sheet items to the classes of financial instruments:

BALANCE SHEET ITEM

M E A S U R E D A T F A I R V A LU E

MEASURED AT AMORTIZED COST¹

DERIVATIVE FINANCIAL

INSTRUMENTS DESIGNATED AS

HEDGES

NOT ALLOCATED TO ANY

MEASUREMENT CATEGORY

€ million June 30,

2020Dec. 31,

2019June 30,

2020 Dec. 31,

2019June 30,

2020Dec. 31,

2019June 30,

2020Dec. 31,

2019June 30,

2020 Dec. 31,

2019

Assets

Cash reserve 48 106 – – 48 106 – – – –

Loans to and receivables from banks 5,633 2,477 12 34 5,621 2,443 – – – –

Loans to and receivables from customers 74,996 79,195 295 310 35,929 38,921 – – 38,771 39,965

Derivative financial instruments 937 736 121 125 – – 816 611 – –

Marketable securities 298 305 298 305 – – – – – –

Equity­accounted joint ventures 712 737 – – – – – – 712 737

Miscellaneous financial assets 613 591 2 2 – – – – 611 588

Current tax assets 180 125 – – 22 20 – – 159 105

Other assets 3,192 3,276 – – 839 963 – – 2,353 2,313

Total 86,609 87,548 728 776 42,459 42,453 816 611 42,606 43,708

Equity and liabilities

Liabilities to banks 13,424 14,472 – – 13,424 14,472 – – – –

Liabilities to customers 15,439 15,740 – – 13,735 14,367 – – 1,704 1,373

Notes, commercial paper issued 62,718 60,943 – – 62,718 60,943 – – – –

Derivative financial instruments 387 427 218 313 – – 169 114 – –

Current tax liabilities 320 373 – – 54 60 – – 266 314

Other liabilities 1,479 1,413 – – 109 98 – – 1,370 1,315

Subordinated capital 4,670 4,947 – – 4,670 4,947 – – – –

Total 98,436 98,315 218 313 94,709 94,887 169 114 3,340 3,002

1 Some of the loans to and receivables from customers and liabilities to customers have been designated as hedged items in fair value hedges and are therefore subject to fair value adjustments. The loans to and receivables from customers and liabilities to customers in the class “Measured at amortized cost” are therefore measured neither entirely at fair value nor entirely at amortized cost.

The “Credit commitments and financial guarantees” class contains obligations under irrevocable credit com­mitments and financial guarantees amounting to €1,281 million (previous year: €1,266 million).

21Interim Consolidated Financial Statements (Condensed) Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

4. Fair Value Disclosures

The principles and methods of fair value measurement have generally remained unchanged compared with those applied in 2019. Detailed disclosures on the measurement principles and methods can be found in the 2019 Annual Report.

For the purposes of fair value measurement and the associated disclosures, fair values are classified using a three­level measurement hierarchy. Classification to the individual levels is dictated by the extent to which the main inputs used in determining the fair value are or are not observable in the market.

Level 1 is used to report the fair value of financial instruments such as marketable securities for which a quoted price is directly observable in an active market.

Level 2 fair values are measured on the basis of inputs observable in the markets, such as exchange rates or yield curves, using market­based valuation techniques. Fair values measured in this way include those for de­rivatives.

Level 3 fair values are measured using valuation techniques incorporating at least one input that is not di­rectly observable in an active market.

The fair values of loans to and receivables from banks and of loans to and receivables from customers are al­located to Level 3 because these fair values are measured using inputs that are not observable in active markets. An equity investment measured at fair value through other comprehensive income and using inputs that are not observable in the market is also reported under Level 3.

The fair value of derivative financial instruments in connection with the risk of early termination is also al­located to Level 3. Inputs for determining the fair value of derivatives in connection with the risk of early ter­mination are forecasts and estimates of used vehicle residual values for the models concerned as well as yield curves.

The following table shows the allocation of financial instruments measured at fair value and derivative finan­cial instruments designated as hedges to the three­level fair value hierarchy by class:

L E V E L 1 L E V E L 2 L E V E L 3

€ million June 30, 2020 Dec. 31, 2019 June 30, 2020 Dec. 31, 2019 June 30, 2020 Dec. 31, 2019

Assets

Measured at fair value

Loans to and receivables from banks – – – – 12 34

Loans to and receivables from customers – – – – 295 310

Derivative financial instruments – – 121 125 – –

Marketable securities 226 305 72 – – –

Miscellaneous financial assets – – – – 2 2

Derivative financial instruments designated as hedges – – 816 611 – –

Total 226 305 1,008 736 309 346

Equity and liabilities

Measured at fair value

Derivative financial instruments – – 72 145 146 168

Derivative financial instruments designated as hedges – – 169 114 – –

Total – – 241 259 146 168

22

Interim Consolidated Financial Statements (Condensed)Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

The following table shows the changes in the loans to and receivables from banks, loans to and receivables from customers, and equity investments measured at fair value and allocated to Level 3.

€ million Jan. 1 – June 30, 2020 Jan. 1 – June 30, 2019

Balance as of Jan. 1 346 363

Foreign exchange differences – 7 0

Changes in basis of consolidation – –

Portfolio changes – 31 1

Measured at fair value through profit or loss 0 2

Measured at fair value through other comprehensive income – –

Balance as of June 30 309 366

The amounts recognized in profit or loss for loans to and receivables from banks and for loans to and receiva­bles from customers resulting in a net gain of €0 million (previous year: net gain €2 million) have been report­ed in the income statement under the item “Net gain or loss on financial instruments measured at fair value and on derecognition of financial assets measured at fair value through other comprehensive income”. Of the amounts recognized in profit or loss, a net gain of €0 million (previous year: net gain of €2 million) was at­tributable to loans to and receivables from banks and loans to and receivables from customers held as of the reporting date.

The risk variables relevant to the fair value of the loans to and receivables from banks and the loans to and receivables from customers are risk­adjusted interest rates. A sensitivity analysis is used to quantify the impact from changes in risk­adjusted interest rates on profit or loss after tax.

If risk­adjusted interest rates as of June 30, 2020 had been 100 basis points higher, profit after tax would have been €2 million (previous year: €2 million) lower. If risk­adjusted interest rates as of June 30, 2020 had been 100 basis points lower, profit after tax would have been €2 million (previous year: €2 million) higher.

The risk variables relevant to the fair value of the equity investment are the growth rate within strategic planning and the cost of equity rates. If a 10% change were applied to the financial performance (which takes into account the relevant risk variables) of the equity investment measured at fair value through other com­prehensive income, there would be no material change to equity.

The following table shows the change in derivatives measured at fair value in connection with the risk of early termination based on Level 3 measurement.

€ million Jan. 1 – June 30, 2020 Jan. 1 – June 30, 2019

Balance as of Jan. 1 168 –

Foreign exchange differences – 12 – 8

Changes in basis of consolidation – 168

Portfolio changes – –

Measured at fair value through profit or loss – 10 10

Measured at fair value through other comprehensive income – –

Balance as of June 30 146 170

The amounts recognized in profit or loss resulting in a net loss of €10 million (previous year: net gain of €10 million) have been reported in the income statement under the item “Net gain or loss on financial instru­ments measured at fair value and on derecognition of financial assets measured at fair value through other comprehensive income”. The net gain was accounted for entirely by derivatives held as of the reporting date.

The risk of early termination can arise from country­specific consumer protection legislation, under which customers may have the right to return used vehicles for which a lease has been signed. The impact on earnings arising from market­related fluctuations in residual values and interest rates is borne by the VW FS AG Group.

23Interim Consolidated Financial Statements (Condensed) Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

The market prices of used vehicles are the main risk variable applied to the fair value of derivatives recognized in connection with the risk of early termination. A sensitivity analysis is used to quantify the impact of changes in used vehicle prices on profit or loss after tax. If the used vehicle prices of the vehicles included in the deriva­tives in connection with the risk of early termination had been 10% higher as of the reporting date, profit after tax would have been €96 million (previous year: €90 million) higher. If the used vehicle prices of the vehicles included in the derivatives in connection with the risk of early termination had been 10% lower as of the re­porting date, profit after tax would have been €120 million (previous year: €118 million) lower.

24

Interim Consolidated Financial Statements (Condensed)Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

The table below shows the fair values of the financial instruments.

F A I R V A LU E C A R R Y I NG A MO U N T D I F F ER E N C E

€ million June 30, 2020 Dec. 31, 2019 June 30, 2020 Dec. 31, 2019 June 30, 2020 Dec. 31, 2019

Assets

Measured at fair value

Loans to and receivables from banks 12 34 12 34 – –

Loans to and receivables from customers 295 310 295 310 – –

Derivative financial instruments 121 125 121 125 – –

Marketable securities 298 305 298 305 – –

Miscellaneous financial assets 2 2 2 2 – –

Measured at amortized cost

Cash reserve 48 106 48 106 – –

Loans to and receivables from banks 5,623 2,445 5,621 2,443 2 2

Loans to and receivables from customers 36,138 39,034 35,929 38,921 209 113

Current tax assets 22 20 22 20 – –

Other assets 839 963 839 963 – –

Derivative financial instruments designated as hedges 816 611 816 611 – –

Not allocated to any measurement category

Lease receivables 39,268 40,973 38,757 39,951 511 1,021

Equity and liabilities

Measured at fair value

Derivative financial instruments 218 313 218 313 – –

Measured at amortized cost

Liabilities to banks 13,401 14,421 13,424 14,472 – 23 – 51

Liabilities to customers 13,676 14,384 13,735 14,367 – 59 18

Notes, commercial paper issued 62,709 61,027 62,718 60,943 – 9 83

Current tax liabilities 54 60 54 60 – –

Other liabilities 109 98 109 98 0 0

Subordinated capital 3,890 4,435 4,670 4,947 – 779 – 512

Derivative financial instruments designated as hedges 169 114 169 114 – –

The difference between the carrying amount and fair value of irrevocable credit commitments is not material because of the short maturity and the variable interest rate linked to the market interest rate. Nor is the differ­ence between carrying amount and fair value of financial guarantees material.

25Interim Consolidated Financial Statements (Condensed) Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Segment Reporting

5. Segment Reporting

The delineation between segments follows that used for internal management and reporting purposes in the VW FS AG Group. The operating result is reported as the primary key performance indicator to the chief operat­ing decision­makers. The information made available to management for management purposes is based on the same accounting policies as those used for external financial reporting.

Internal management applies a market­based geographical breakdown. Foreign branches of German subsid­iaries are allocated to the markets in which they are based. The geographical markets of Germany, the United Kingdom, Sweden, China, Brazil and Mexico are the segments that are reportable under IFRS 8. Subsidiaries in the VW FS AG Group are aggregated within these segments. In line with internal reporting practice, the German market is composed of companies in Germany and Austria. All other companies that can be allocated to geo­graphical markets are brought together under “Other Segments”.

Companies that are not allocated to any geographical market are reported in the reconciliation. The recon­ciliation also includes the VW FS AG holding company, the holding and financing companies in the Nether­lands, France and Belgium, EURO Leasing companies in Germany, Denmark and Poland, Volim Volkswagen Immobilien Vermietgesellschaft für VW­/Audi­Händlerbetriebe mbH, Volkswagen Insurance Bro­kers GmbH and Volkswagen Versicherung AG. In the internal reporting structure, this presentation ensures that there is a separation between market activities on one side and typical holding company or financing func­tions, industry business, primary insurance business and reinsurance business on the other side. Effects from consolidation between the segments and from the provision for country risks are additionally included in the reconciliation.

All business transactions between the segments – where such transactions take place – are conducted on an arm’s­length basis.

In accordance with IFRS 8, noncurrent assets are reported exclusive of financial instruments, deferred tax assets, post­employment benefits and rights under insurance contracts.

26

Interim Consolidated Financial Statements (Condensed)Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

B R E A K D O W N BY G E O G R A P H I C A L M A R K E T F O R T H E F I R ST H A L F O F 2 0 1 9 :

J A N . 1 – J U N E 3 0 , 2 0 1 9

€ million Germany ChinaUnited

Kingdom Mexico BrazilOther

segmentsSegments

totalRecon­

ciliation Group

Interest income from lending transactions and marketable securities in respect of third parties 4 361 2 147 256 232 1,002 41 1,043

Income from leasing transactions with third parties 4,025 – 643 143 7 657 5,474 67 5,541

of which reversal of impairment losses in accordance with IAS 36 38 – 15 – 0 13 66 – 66

Intersegment income from leasing transactions – – – – – – – – –

Depreciation, impairment losses and other expenses from leasing transactions – 3,626 – – 379 – 85 – 3 – 531 – 4,623 – 63 – 4,686

of which impairment losses in accordance with IAS 36 – 91 – – 0 0 – 30 – 121 0 – 121

Net income from leasing transactions 399 – 264 58 4 126 851 4 855

Interest expense – 68 – 138 – 78 – 86 – 112 – 135 – 618 – 21 – 638

Income from service contracts with third parties 612 – 35 – 1 134 782 12 794

Intersegment income from service contracts – – – – – – – – –

Income from insurance business with third parties – – – – – – – 159 159

Intersegment income from insurance business – – – – – – – – –

Fee and commission income from third parties 81 – 1 28 37 48 195 12 206

Intersegment fee and commission income – – – – – – – – –

Other amortization, depreciation and impairment losses – 1 – 3 – 1 0 – 3 – 10 – 18 – 12 – 30

Operating result 143 97 73 54 57 83 505 – 136 369

The Swedish geographical market was not a part of the VW FS AG Group until the second half of the 2019 fiscal year. Therefore the market is not included in the table covering the previous year.

27Interim Consolidated Financial Statements (Condensed) Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

B R E A K D O W N BY G E O G R A P H I C A L M A R K E T F O R T H E F I R ST H A L F O F 2 0 2 0 :

J A N . 1 – J U N E 3 0 , 2 0 2 0

€ million Germany ChinaUnited

Kingdom Sweden Mexico BrazilOther

segmentsSegments

totalRecon­

ciliation Group

Interest income from lending transactions and marketable securities in respect of third parties 6 394 4 15 112 220 233 984 11 994

Income from leasing transactions with third parties 4,391 – 1,103 1,326 107 4 1,035 7,966 73 8,040

of which reversal of impairment losses in accordance with IAS 36 12 – 0 0 0 0 18 32 0 32

Intersegment income from leasing transactions – – – – – – 1 1 – 1 –

Depreciation, impairment losses and other expenses from leasing transactions – 4,188 – – 626 – 1,276 – 59 – 2 – 880 – 7,031 – 55 – 7,086

of which impairment losses in accordance with IAS 36 – 210 – – 23 0 – 1 0 – 56 – 289 0 – 289

Net income from leasing transactions 203 – 477 50 48 1 156 936 17 953

Interest expense – 96 – 133 – 154 – 10 – 65 – 81 – 131 – 670 5 – 665

Income from service contracts with third parties 702 – 62 – – 0 218 983 11 994

Intersegment income from service contracts – – – – – – – – – –

Income from insurance business with third parties – – – – – – – – 177 177

Intersegment income from insurance business – – – – – – – – – –

Fee and commission income from third parties 64 – 3 2 24 29 104 227 22 249

Intersegment fee and commission income – – – – – – – – – –

Other amortization, depreciation and impairment losses – 1 – 5 – 2 0 0 – 2 – 15 – 25 – 13 – 38

Operating result – 11 79 220 31 67 73 129 589 – 61 528

Information on the main products (lending and leasing business) can be taken directly from the income state­ment.

28

Interim Consolidated Financial Statements (Condensed)Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

The breakdown of noncurrent assets in accordance with IFRS 8 and of the additions to noncurrent lease assets by geographical market is shown in the following tables: J A N . 1 – J U N E 3 0 , 2 0 1 9

€ million Germany China United Kingdom Mexico Brazil

Noncurrent assets 12,267 24 3,099 45 269

Additions to lease assets classified as noncurrent assets 3,114 – 345 2 0

J A N . 1 – J U N E 3 0 , 2 0 2 0

€ million Germany China United Kingdom Sweden Mexico Brazil

Noncurrent assets 13,300 23 2,776 1,278 34 200

Additions to lease assets classified as noncurrent assets 3,762 – 443 247 1 –

Investment recognized under other assets was of minor significance. The following table shows the reconciliation to consolidated revenue, consolidated operating result and consol­idated profit before tax.

€ million Jan. 1 – June 30, 2020 Jan. 1 – June 30, 2019

Segment revenue 10,159 7,453

Other companies 287 213

Consolidation – 169 – 82

Group revenue 10,277 7,585

Segment profit or loss (operating result) 589 505

Other companies – 46 – 116

Contribution to operating profit by included companies – 21 – 12

Consolidation 6 – 9

Operating result 528 369

Share of profits and losses of equity­accounted joint ventures 23 26

Net gain or loss on miscellaneous financial assets – 6 30

Other financial gains or losses – 3 – 6

Profit before tax 542 418

29Interim Consolidated Financial Statements (Condensed) Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

Other Disclosures

6. Cash Flow Statement

VW FS AG Group’s cash flow statement documents changes in cash and cash equivalents attributable to cash flows from operating, investing and financing activities. The narrow definition of cash and cash equivalents comprises only the cash reserve, which consists of cash­in­hand and central bank balances.

7. Off­Balance­Sheet Liabilities

CO N T I N G E N T L I A B I L I T I E S

The contingent liabilities of €275 million (December 31, 2019: €374 million) relate largely to legal disputes concerning tax matters in which the criteria for the recognition of a provision in accordance with IAS 37 was not satisfied. After an analysis of the individual cases covered by the contingent liabilities, it is believed that the disclosure of further detailed information on individual proceedings, legal disputes and legal risks could seri­ously prejudice the course of those proceedings.

The trust assets and liabilities of the savings and trust entity belonging to the Latin American subsidiaries are not included in the consolidated balance sheet and amounted to €268 million (December 31, 2019: €419 million).

OT H E R F I N A N C I A L O B L I G AT I O N S

D U E D U E D U E T OT A L

€ million 2020 2021 – 2024 from 2025 Dec. 31, 2019

Purchase commitments in respect of

property and equipment 10 – – 10

intangible assets 2 – – 2

investment property – – – –

Obligations from

irrevocable credit and leasing commitments to customers 369 – – 369

long­term leasing and rental contracts 6 1 1 8

Miscellaneous financial obligations 48 1 – 49

30

Interim Consolidated Financial Statements (Condensed)Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

D U E D U E D U E T OT A L

€ million by June 30, 2021July 1, 2021 –

June 30, 2025 from July 1, 2025 June 30, 2020

Purchase commitments in respect of

property and equipment 4 – – 4

intangible assets 1 – – 1

investment property – – – –

Obligations from

irrevocable credit and leasing commitments to customers 428 – – 428

long­term leasing and rental contracts 13 16 1 29

Miscellaneous financial obligations 49 0 – 49

In the case of irrevocable credit commitments, the Company expects the customers to draw down the facilities concerned.

8. Related Party Disclosures

Related parties as defined by IAS 24 are natural persons and entities that VW FS AG has control over or over which it has significant influence, or natural persons and entities that have control over or can exercise signifi­cant influence over VW FS AG, or who are under the influence of another related party of VW FS AG.

Volkswagen AG, Wolfsburg, is the sole shareholder of VW FS AG. Porsche Automobil Holding SE, Stuttgart, held the majority of the voting rights in Volkswagen AG as of the reporting date. The Extraordinary General Meeting of Volkswagen AG held on December 3, 2009 approved the creation of rights of appointment for the State of Lower Saxony. As a result, Porsche SE can no longer appoint a majority of the members of Volkswagen AG’s Supervisory Board for as long as the State of Lower Saxony holds at least 15% of Volkswagen AG’s ordinary shares. However, Porsche SE has the power to participate in the operating policy decisions of the Volkswagen Group and is therefore deemed to be a related party as defined by IAS 24. Accord­ing to a notification dated January 2, 2020, the State of Lower Saxony and Hannoversche Beteiligungsgesell­schaft mbH, Hanover, held 20.00% of the voting rights in Volkswagen AG on December 31, 2019. They therefore indirectly have significant influence over the VW FS AG Group. As mentioned above, the General Meeting of Volkswagen AG on December 3, 2009 also resolved that the State of Lower Saxony may appoint two members of the Supervisory Board (right of appointment).

VW FS AG and its sole shareholder Volkswagen AG have a control and profit­and­loss transfer agreement. Volkswagen AG and other related parties in Volkswagen AG’s group of consolidated entities provide the en­

tities in the VW FS AG Group with funding on an arm’s­length basis. As part of funding transactions, Volkswagen AG and other related parties in Volkswagen AG’s group of consolidated entities sold vehicles to entities in the VW FS AG Group on an arm’s­length basis. These transactions are presented in the “Goods and services received” column. Volkswagen AG and its subsidiaries have also furnished collateral for the benefit of VW FS AG within the scope of the operating business.

The “Goods and services provided” column primarily contains income from leasing transactions. The business transactions with unconsolidated subsidiaries and joint ventures of VW FS AG mainly relate to

the provision of funding and services. These transactions are always conducted on an arm’s­length basis, e.g. when using the cost plus method for the provision of services. The two tables below show the transactions with related parties. In these tables, the exchange rates used are the closing rate for asset and liability items, and the weighted average rates for the year for income statement items.

31Interim Consolidated Financial Statements (Condensed) Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

I N T E R E ST I N C OM E

H 1 I N T E R E ST E X P E N S E

H 1

G O O D S A N D SE R V I CE S P R O VI D E D

H 1

G O O D S A N D SE R V I CE S R E C EI V E D

H 1

€ million 2020 2019 2020 2019 2020 2019 2020 2019

Supervisory Board – – – – 0 – – –

Board of Management – – – – – – – –

Volkswagen AG 1 1 – 12 – 8 621 405 3,604 4,734

Porsche SE – – – – 0 0 – –

Other related parties in the consolidated entities1 36 45 – 89 – 67 1,609 1,053 4,834 1,689

Non­consolidated subsidiaries 1 3 – 1 – 1 11 52 26 31

Joint ventures 29 51 – – 210 210 234 216

Associated companies1 – – – – 0 1 – –

1 Separate presentation of associated companies. Prior year figures have been adjusted.

L O A N S T O A N D

R E C EI V A B L E S F R O M

V A L U A T I O N A L L OW A N C E S O N

I MP A I RE D LO A N S A N D R E C EI V A B L E S

O F W HI C H A D D I T I O N S I N C U RR E NT Y E AR

L I A BI L I T I E S T O

€ million June 30,

2020Dec. 31,

2019June 30,

2020Dec. 31,

2019June 30,

2020Dec. 31,

2019June 30,

2020Dec. 31,

2019

Supervisory Board – – – – – – – –

Board of Management – – – – – – – –

Volkswagen AG 3,422 3,241 – – – – 8,525 8,523

Porsche SE 0 0 – – – – – –

Other related parties in the consolidated entities 8,226 6,409 – – – – 10,348 10,685

Non­consolidated subsidiaries 194 226 – – – – 218 193

Joint ventures 6,007 6,054 – – – – 237 170

Associated companies1 – – – – – – – –

1 Separate presentation of associated companies.

The “Other related parties in the consolidated entities” line includes, in addition to sister entities, joint ventures and associates that are related parties in Volkswagen AG’s group of consolidated entities. The relationships with the Supervisory Board and the Board of Management comprise relationships with the relevant groups of people at VW FS AG and the Group parent company Volkswagen AG. As in the prior year, relationships with pension plans and the State of Lower Saxony were of lesser significance.

In the first half of 2020, VW FS AG received no capital contributions from Volkswagen AG (previous year: €1,348 million). However, VW FS AG and its subsidiaries provided capital contributions to related parties of €88 million (previous year: €27 million). Members of the Board of Management and Supervisory Board of VW FS AG are also members of management and supervisory boards of other entities in the Volkswagen Group with which VW FS AG sometimes conduct transactions in the normal course of business. All transactions with these related parties are on an arm’s­length basis.

In the first half of 2020, standard short­term bank loans amounting to an average total of €170 million (De­cember 31, 2019: €138 million) were granted to related parties as part of dealer financing.

32

Interim Consolidated Financial Statements (Condensed)Notes to the Interim Consolidated Financial Statements

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

9. Governing Bodies of Volkswagen Financial Services AG

Effective March 1, 2020, Mr. Alexander Seitz was appointed to the Supervisory Board of Volkswagen Financial Services AG. Mr. Hans­Joachim Rothenpieler stepped down from the Supervisory Board on February 29, 2020.

Ms. Christiane Hesse is resigning from the Board of Management effective July 31, 2020. Dr. Alexandra Baum­Ceisig has been appointed as a member of the Board of Management of Volkswagen Financial Ser­vices AG as the successor to Christiane Hesse with effect from August 1, 2020.

10. Events After the Balance Sheet Date

There were no significant events in the period between June 30, 2020 and July 24, 2020.

33Interim Consolidated Financial Statements (Condensed) Responsibility Statement

Volkswagen Financial Services AG | Half­Yearly Financial Report 2020

To the best of our knowledge, and in accordance with the applicable reporting principles for interim reporting, the condensed interim consolidated financial statements in accordance with generally accepted accounting principles give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the material opportunities and risks associated with the expected development of the Group over the rest of the fiscal year. Braunschweig, July 24, 2020 Volkswagen Financial Services AG The Board of Management

Lars Henner Santelmann Dr. Mario Daberkow

Frank Fiedler Christiane Hesse

Responsibility Statement

P U B L I S H E D BY

Volkswagen Financial Services AG Gifhorner Straße 57 38112 Braunschweig, Germany Telephone +49 (0) 531 212­0 info@vwfs.com www.vwfs.com I N V E STO R R E L AT I O N S

Telephone +49 (0) 531 212­30 71 ir@vwfs.com Produced in­house with firesys This half­yearly financial report is also available in German at www.vwfs.com/hjfb20

VOLKSWAGEN FINANCIAL SERVICES AG Gifhorner Straße 57 ∙ 38112 Braunschweig ∙ Germany ∙ Phone +49 (0) 531 212­0 info@vwfs.com ∙ www.vwfs.com ∙ www.facebook.com/vwfsde Investor Relations: Phone +49 (0) 531 212­30 71 ∙ ir@vwfs.com